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Three-week winning streak comes to an end

AUD/USD  finished lower last week at 0.6611 (-0.63%), snapping its three-week winning streak. The pullback coincided with a rebound in the US Dollar Index (DXY), as traders largely looked through last week’s key US data releases.

Mixed signals from US economic data

The cooler US November consumer price index (CPI) report was viewed as unreliable due to measurement issues stemming from the prolonged government shutdown. Meanwhile, the November non-farm payrolls (NFP) report offered mixed signals.

On the positive side, private payrolls proved relatively resilient, rising by 69,000 in November. Offsetting this gain, the unemployment rate ticked up to 4.6% – the highest level since September 2021.

On balance, last week’s US data reinforced expectations for two 25 basis point (bp) Federal Reserve (Fed) rate cuts in 2026, without advancing the case for a more aggressive Fed easing cycle next year.

Risk aversion also played a role in Australian dollar’s (AUD) decline, as US equities spent much of the week under pressure amid concerns over elevated valuations and high debt levels in the artificial intelligence (AI) sector. Finally, last week’s decline in AUD/USD reflected profit taking following its sharp 4.10% rally from 21 November low of 0.6419 to 10 December high of 0.6685.

Key events ahead

Looking ahead, Tuesday’s Reserve Bank of Australia (RBA) December meeting minutes and Wednesday’s third-quarter (Q3) gross domestic product (GDP) print will be pivotal, alongside month- and quarter-end rebalancing flows, in determining whether AUD/USD can retest recent highs.

RBA meeting minutes

Date: Tuesday, 23 December at 11.30am AEDT

At its December Board meeting, RBA held the cash rate unchanged at 3.60%, as widely anticipated, marking the third consecutive hold.

The decision came with a hawkish tone in the accompanying statement. Key observations included inflation appearing more broad-based, strengthening private sector growth, a recovering housing market, a still-tight labour market, capacity utilisation remaining above long-run averages, elevated unit labour costs, and the potential for further capacity pressures if private demand continues to accelerate.

RBA Governor Michele Bullock’s subsequent press conference reinforced this hawkishness, noting that a rate cut was not considered, while the Board did discuss scenarios that could warrant a hike. She emphasised RBA’s tightening bias, stating that ‘if it looks like inflation is not coming back to the band then the Board will have to take action, and it will.’

The upcoming minutes will be closely scrutinised for deeper insights into potential triggers and timing around a first rate hike or a shift back toward a neutral policy stance.

Australian interest rate market starts the week pricing in 9 bp of RBA rate hikes for February. There are 25 bp of rate hikes priced for July and a cumulative 41 bp of rate hikes priced between now and the end of 2026.

RBA cash rate chart

From Wednesday 24 December,  specified areas of high-use swimming locations including Dutchman’s Beach, Nelson Bay Beach (Fly Point) and Shoal Bay will be designated zones where powered vessels – including personal watercraft such as jet skis – will be temporarily restricted.

This trial will run across the peak period to Monday, 26 January and is designed to test whether localised safety zones can reduce risk for all local waterway users.

The majority of the three beach locations will remain the same with only 800 meters of the 3.2km of beachfront allocated as powered vessel free zones. 

Beachgoers are still free to swim wherever they choose.

During the trial all powered vessels must stay at least 30m from the shoreline. Clear signage will be installed at all trial sites and nearby launch points.

The trial is important as in NSW jet ski ownership has climbed by nearly 23 per cent over the last five years and licenses have surged by 38 per cent. 

This rise has led to concerns about the safe sharing of crowded beaches with swimmers and paddlers during peak holiday seasons.

At the same time it is estimated that over the Christmas and summer holiday period, Port Stephens experiences an increase of approximately 50,000 to 150,000 residents. On top of that up to 30,000 day visitors flock to the area.

Throughout the trial period NSW Maritime will be connecting with water users, the community and local businesses to collect feedback on the safety measures.

NSW Police Marine Area Command vessels will also be patrolling the waterways educating and engaging with users to ensure everyone is safe. 

The community is encouraged to provide feedback on the trial through the Have You Say website here or via QR codes on signage displayed at each trial location.

For more information including details on the trial zone locations visit here.

Executive Director Transport for NSW Maritime, Mark Hutchings said:

“This trial is a practical way to test solutions in response to community concerns. We’ve heard consistent feedback about safety and amenity issues on our busy waterways and this trial is a direct response. 

“The trial will be independently evaluated and feedback gathered will inform how we manage safety of these high-use waterways into the future.

“I strongly encourage the local community to provide feedback on the trial through the Have You Say website or via QR codes on the signage displayed at each location.

“Port Stephens has some of our state’s most popular waterways and beaches. This trial is about keeping everyone safe while enjoying the water regardless of what activity they’re doing.

“There are extensive areas across Port Stephens where powered vessels can operate safely and responsibly. This trial focuses only on a few high-use swimming and recreation areas.

“Our Boating Safety Officers will be working with NSW Police Marine Area Command on the water to educate the community about the trial and encourage compliance from powered vessel users.”

NSW Police Marine Area Command, Superintendent Joseph McNulty said:

“Marine Area Command officers will be out in force on waterways in Port Stephens over summer to keep people safe and to ensure they are complying with the rules.

 “Our priority is ensuring everyone who wants to enjoy the water – whether they are a swimmer or paddler, or on a powered vessel or boat – can do so safely.

“While most powered vessel operators do the right thing, we have seen some users riding dangerously or recklessly.

“Our focus will be on educating jet ski riders about the new restrictions, but we will take enforcement action when required.”

To reduce air pollution from ships, California Air Resources Board (CARB) implemented emissions control regulations for oceangoing vessels and commercial harbor craft. Shore power, which allows ships to plug into shore-based electrical power sources to operate their electrical systems while turning off their auxiliary engines, can effectively eliminate local air pollutant emissions, and has been identified as a key compliance strategy in CARB’s regulations. However, despite shore power’s role in California’s emissions control regulations and its growing adoption internationally, the magnitude of electricity demand from widespread shore power use and its implications for grid planning remain unclear.

To address this knowledge gap, this brief estimates the annual and hourly demand from shore power in California through 2050 under four scenarios, comparing these projections against statewide electricity demand forecasts. The study also quantifies air quality and health benefits from maximizing shore power use in California.

The analysis finds that shore power electricity demand would be less than 0.2% of California’s forecasted electricity deliveries in 2050 even under the maximum adoption scenario. Additionally, eliminating all at-berth auxiliary engine emissions through shore power could have avoided approximately 30 premature deaths annually in California, representing $321 million in economic benefits.

As technologies for the electrification of boiler functions mature, California could extend emissions control requirements to boilers, substantially increasing both air quality benefits and shore power infrastructure requirements. Such expansion would require coordinated planning between ports, utilities, and regulators to ensure adequate generation, transmission, and distribution capacity.