Synopsis:

ANZ sees upside risk for AUD/USD around this week's RBA February meeting, given strong domestic data, resilient household consumption, and tight labor market conditions. However, any rally will likely be short-lived, with 0.64 as the best-case scenario, as tariff risks and broader USD strength still pose downside risks into H1 2025.

Key Points:

1. Short-Term Upside Around RBA Meeting:

   • Resilient Australian data (strong consumption & tight labor market) suggests a shallower easing cycle than markets expect.
   • The RBA may deliver a cautious or neutral cut, which could spark a short-term AUD/USD rise.
   • Q4 WPI and labor force data later this week could reinforce the move higher if strong.

2. Upside Capped Around 0.64:

   • Even in a best-case scenario, ANZ sees 0.64 as the cap for any AUD/USD rally.
   • The sustainability of the rebound depends on a weaker USD, which remains unlikely in the current macro environment.

3. Downside Risks Persist Into H1 2025:

   • US tariffs and trade risks continue to pose major downside risks for AUD.
   • ANZ still expects AUD/USD to test below 0.60 in H1 2025 as these risks materialize.

Conclusion:

ANZ sees room for a short-term AUD/USD rally around the RBA meeting, but any gains will likely be capped at 0.64. Tariff risks and USD strength still dominate, keeping H1 2025 risks tilted to the downside, with a test below 0.60 still likely.