AUD Edges Higher on Revived RBA Rate-Hike Bets Ahead of Powell and Jobs Data

The AUD/USD pair edged higher during Monday's Asian session, trading near 0.71307. The currency's strength was primarily underpinned by revived market expectations of a Reserve Bank of Australia (RBA) rate hike. Investors are closely monitoring the upcoming US jobs data and Federal Reserve Chair Powell's speech to gauge the dollar's next move.

**Rate-Hike Expectations as Key Driver**

Markets broadly expect the RBA to announce a 25-basis-point rate hike at next week's monetary policy meeting, lifting the cash rate target to 4.10%. This expectation stems from a recent run of stronger-than-expected inflation data, showing consumer inflation has climbed back above the RBA's 2%-3% annual target range. According to market reports, all four major Australian banks predict the central bank will hike in March, with a possible further move in May. Additionally, Middle East conflicts have driven fuel prices sharply higher, and given Australia's heavy reliance on oil imports, this intensifies imported inflation risks, potentially forcing the central bank to tighten policy earlier to guard against inflation effects.

**AUD Reaction and Risks**

Historically, the AUD/USD has responded positively to RBA rate hikes. However, this hike expectation has been largely priced in by the market, and the 5:4 vote margin for the hike decision signals internal divisions. If the post-meeting statement fails to deliver a sufficiently hawkish signal, or if global risk sentiment deteriorates due to geopolitical conflicts, the Aussie could face pullback pressure from a "buy the rumor, sell the fact" dynamic. Meanwhile, on the US side, Fed official Waller indicated he might support holding rates steady if inflation data improves, adding uncertainty to the dollar's near-term trajectory.

**Key Focus Ahead**

This week, market attention shifts to the US nonfarm payrolls report and Fed Chair Powell's speech. If the US labor market shows signs of weakness, it would reinforce expectations of a Fed pause, weighing on the dollar and providing further upside momentum for the Aussie. Conversely, strong data could trigger a dollar rebound, capping the Aussie's gains. Investors should be wary that the AUD/USD may remain range-bound ahead of the key data releases.