The AUD/USD turns upward! The market is wildly betting on rate hikes in 2026, and the AUD/CNY also has some highlights?

October’s household expenditure data just been released, and the market exploded. The Australian Bureau of Statistics shows that household spending increased by 1.3% month-on-month, smashing the expected 0.6%, and surged 5.6% year-on-year, far exceeding the 4.6% forecast. Once this data came out, the entire market’s attitude towards the Reserve Bank of Australia instantly reversed.

How fierce is the rebound? The Australian 3-year government bond yield forcefully broke through 4%, the first time since January this year. The AUD/USD also took off, with investors beginning to reassess this once-doubted currency pair. To understand the potential of the AUD, one must look at the AUD against the RMB— as the AUD strengthens against the USD, its pressure on the RMB is also increasing, which is valuable for cross-border investors.

Inflation Still Hot, Central Bank May “Turn” Ahead of Schedule

The problem is, inflation is never-ending. Australia’s October CPI rose 3.8% year-on-year, exceeding expectations, and more importantly, showing no signs of weakening. Capital Economics economist Abhijit Surya bluntly stated: “The surge in household spending confirms that the RBA will not cut interest rates again; instead, the risk is they may be forced to tighten policy earlier.”

This is no falsehood. Although the RBA has cut rates three times this year, the December 9 rate decision is expected to hold steady at 3.6%. The real turning point is ahead—the market is now wildly betting on a rate hike cycle in 2026.

Probability of Rate Hike in 2026 Soars from 18% to 55%

This is where the story gets exciting. After the household expenditure data was released, the market’s expectation of a rate hike in May 2026 jumped from 18% on Wednesday to 55%. What does this mean? The market sentiment has shifted 180 degrees; investors now believe the RBA is much more likely to raise rates than to continue cutting.

Several international banks are adjusting their AUD forecasts. National Australia Bank (NAB) predicts AUD/USD will reach 0.67 by December 2025 and rise to 0.71 by June 2026. Westpac is more aggressive, expecting 0.69 in March 2026, rising to 0.70 in September, and hitting 0.71 by the end of the year. Even ING is bullish, expecting 0.68 in Q2 2026 and 0.69 by year’s end.

What’s Next? Policy Is the Key

The future of the AUD is in the hands of the RBA. As long as inflation remains high, expectations for rate hikes will continue to strengthen, providing a basis for the AUD to rise. For investors watching the AUD/RMB trend, an appreciating AUD means the RMB is under relative pressure, which involves considerations for overseas asset allocation.

Overall, the expectation of a rate hike in 2026 by the RBA has already formed, and market betting is intensifying. The rebound of AUD/USD may continue, with the next key moment being the December 9 rate decision—if the RBA’s wording is more hawkish than expected, both the AUD/RMB and AUD/USD could see a new round of gains.