WEEKLY CURRENCY OUTLOOK

Weekly FX Update

07 September 2026

The AUD is stronger — but inflation gets the microphone this week

The Australian dollar starts the week in a stronger position, with the latest official RBA reference rate showing AUD/USD at 0.7210.

That is a clear improvement from the 0.69–0.71 range that dominated much of July and August. The AUD is now trading near its strongest levels since May, supported by a softer US dollar tone, firmer commodity-linked sentiment and a stronger trade-weighted profile.

However, this week is not a quiet one. The main global focus is the United States, where August PPI is due Thursday night Sydney time and August CPI is due Friday night. These releases are critical because the Federal Reserve meets next week and markets are still debating whether inflation is cooling enough to avoid another rate rise.

Europe is also important this week, with the European Central Bank expected to raise rates by 25 basis points. That could influence EUR/AUD and broader global rate expectations.

Oil remains the main geopolitical wildcard. Brent crude is trading around the mid-to-high US$90s per barrel, keeping energy-driven inflation risk alive.

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What Is Driving the Australian Dollar?

1. AUD/USD has moved above 0.72
   The AUD’s move to 0.7210 is technically important. It confirms that the currency has extended beyond the 0.70–0.71 range and is now in a stronger short-term position. The next question is whether US inflation data allows the move to hold.
2. US inflation is the main global event
   This week’s US PPI and CPI reports are the key drivers for the US dollar. A hotter inflation result would likely support the USD and could pull AUD/USD lower. A softer result would give the AUD more room to hold above 0.72.
3. The Fed is in quiet-period mode before next week’s decision
   With the next Fed decision due next week, markets will place extra weight on the inflation data. There will be limited fresh Fed commentary, so the data itself will do most of the talking.
4. The ECB decision matters for EUR/AUD
   The ECB is expected to lift rates again this week as energy prices keep inflation pressure elevated. A hawkish ECB could support the euro and limit AUD/EUR upside, while a more cautious message may help the AUD hold its recent gains against the euro.
5. China remains important for AUD sentiment
   China’s recent manufacturing data improved, but the broader recovery remains uneven. This week’s China inflation and trade signals will be watched for signs that domestic demand is improving. A stronger China picture would support the AUD through the commodity-demand channel.
6. Oil remains the wildcard
   Oil prices remain elevated due to ongoing Middle East and supply-route risks. Higher oil can be supportive for commodity sentiment, but in the current environment the inflation channel is more important. If oil pushes higher again, markets may move back toward the USD.

Market Snapshot

Currency pair     Indicative level              Current tone

AUD/USD            0.7210                               Firmer, above 0.72

AUD/EUR            0.6201                               Firmer against the euro

AUD/GBP            0.5327                               Firmer against sterling

AUD/NZD            1.2227                              Stronger versus NZD

AUD/JPY              112.71                              Softer versus last week as JPY steadies

AUD/CNY            4.8419                             Stronger, China-sensitive

AUD Trade-Weighted Index        66.4   Broadly firm

Key Economic Events This Week (Sydney Time)

AUD Outlook

The AUD starts the week with a constructive but data-sensitive bias. The move above 0.72 is encouraging, but the currency now needs US inflation data to cooperate.

The most supportive outcome for the AUD would be softer US CPI/PPI, stable oil prices, steady China data and an ECB decision that does not trigger a broad risk-off move. That combination would support the view that AUD/USD can hold above 0.72.

The less favourable outcome would be sticky US inflation, higher oil prices, weak China data and a more hawkish global central-bank tone. That would likely revive USD demand and could pull AUD/USD back toward the 0.71 area.

For businesses with upcoming USD payments, the key risk windows are Thursday night and Friday night Sydney time. For EUR exposures, the ECB decision on Thursday night is the main event. For China-sensitive exposures, watch this week’s China data and commodity headlines.

Quick Take

AUD-positive scenario: US inflation cools, China data holds up, oil stabilises, and AUD/USD remains above 0.72.

AUD-negative scenario: US CPI/PPI stay sticky, oil rises further, China data disappoints, and the USD regains momentum before next week’s Fed meeting.