The Australian Dollar’s Subtle Struggles Amid Rising Inflation Hopes
- The Australian dollar remains low, even as consumer inflation expectations have climbed to 4.7% in September.
- The AUD is receiving some backing because there’s an 86% likelihood that the Reserve Bank of Australia (RBA) won’t change its policy this month.
- There’s a chance of a weakening US dollar due to a less-than-expected producer price index (PPI) boost, relieving some earlier concerns.
On Thursday, the Australian Dollar (AUD) saw a slight drop after hitting gains previously. There’s a belief that the AUD/USD pair might strengthen as the US dollar encounters hurdles. Traders are perhaps hoping for a more relaxed Federal Reserve stance after the recent PPI figures came in softer than anticipated.
The AUD has gained some footing thanks to solid recent economic data from Australia, which has tempered expectations for further rate cuts from the RBA. Current swaps imply about an 86% chance that the RBA will hold steady this month.
Consumer inflation expectations in Australia have risen from 3.9% in August to 4.7% in September, indicating heightened domestic demand and raising worries about new inflationary pressures. RBA Governor Michele Bullock noted that the private sector is starting to exhibit some growth.
Attention may now shift toward the upcoming US Consumer Price Index (CPI) data, expected later today, which could bolster hopes for a significant 50-basis point rate cut next week. Predictions for headline CPI suggest a year-on-year increase of 2.9% for August, while core CPI is expected to rise 3.1% over the same period.
US Rate Cuts and the Australian Dollar’s Status
- The US Dollar Index (DXY), assessing the dollar against six prominent currencies, is around 97.80. There’s broad anticipation for rate cuts in September, but the dollar is facing difficulties as the Fed’s easing strategy adjusts.
- The market has already priced in a 25-basis point cut in the Fed’s September meeting, though there’s now nearly a 12% chance for a 50-basis point reduction, per the CME FedWatch tool.
- The U.S. Bureau of Labor Statistics revealed that PPI inflation dipped from 3.3% in July to 2.6% year-on-year in August, missing market expectations.
- Preliminary estimates from the BLS suggest a revision in total agricultural employment figures from March 2025, forecasting a lower labor market than initially thought.
- Bank of Chicago President Austan Ghoolsby expressed uncertainty about the appropriateness of a September rate cut given the recent employment downturn while still being concerned about persistent inflation.
- China’s CPI fell by 0.4% year-on-year in August, which was below market expectations. This change in China’s economy might impact the AUD due to the close trading relationship between the two nations.
- Matthew Hassan, who leads macro forecasting in Australia, pointed out a slowdown in consumer recovery since mid-2024, which could necessitate further policy adjustments, including a potential 25-basis point rate cut in November.
The Australian Dollar Holds Above Key Levels
AUD/USD is sitting around 0.6620. Technical analysis indicates that the pair is still within a rising channel pattern, suggesting a persistent upward inclination. The pair has also remained above the nine-day exponential moving average, hinting at strong short-term momentum.
Key resistance is found near 0.6635, representing a ten-month peak reached on September 10th, while the upper boundary of the ascending channel is around 0.6650. A breach of this significant resistance would reinforce the bullish sentiment and support a potential increase for the AUD/USD pair to levels observed in November 2024.
If the AUD/USD pair declines, initial support exists at a nine-day EMA of 0.6572, closely associated with the channel’s lower boundary at 0.6560. A slip below this channel could turn sentiment bearish and lead to a test of the 50-day EMA at 0.6517. Such a drop could also put downward pressure on the pair, perhaps testing lows around 0.6414, observed three months ago on August 21.
AUD/USD: Daily Observations
Current Australian Dollar Exchange Rates
Below is a table showing the changes in the Australian Dollar (AUD) against major currencies today. Notably, the AUD stands as the weakest compared to the US dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | 0.04% | 0.12% | 0.06% | 0.11% | -0.00% | 0.04% | |
| EUR | 0.01% | 0.04% | 0.00% | 0.07% | 0.07% | 0.04% | 0.00% | |
| GBP | -0.04% | -0.04% | -0.02% | 0.00% | -0.02% | 0.00% | -0.03% | |
| JPY | -0.12% | 0.00% | 0.02% | 0.00% | 0.02% | 0.02% | -0.01% | |
| CAD | -0.06% | -0.07% | -0.01% | -0.01% | -0.09% | -0.02% | -0.01% | |
| AUD | -0.11% | -0.07% | 0.02% | -0.02% | 0.09% | -0.04% | -0.07% | |
| NZD | 0.00% | -0.04% | -0.00% | -0.02% | 0.02% | 0.04% | -0.05% | |
| CHF | -0.04% | -0.00% | 0.03% | 0.00% | 0.01% | 0.07% | 0.05% |
This table illustrates the exchange rates for today, showing how the Australian dollar navigates its position against other major currencies.
