Australian Dollar Gains as RBA Expected to Hold Rates Steady
- The Australian dollar is on the rise, with many anticipating that the Reserve Bank of Australia (RBA) will keep interest rates unchanged on Tuesday.
- Australia has reported a budget deficit of around $10 billion, significantly less than the Treasury’s forecast of $27.9 billion.
- The US dollar has dropped following inflation data from August that increased expectations for another Federal Reserve rate cut in October.
The Australian dollar (AUD) experienced an uplift on Monday, as the AUD/USD pair continued to gain traction for a second day. The US dollar (USD) weakened as traders reacted to looming US government shutdowns set for October 1st.
The AUD is bolstered by the likelihood of interest rate cuts by the RBA, especially after consumer price index data in August showed stronger-than-anticipated results. Currently, there’s a 6.5% probability for a 25 basis point rate reduction at the RBA’s meeting on Tuesday, and a 38.2% probability for a similar cut in November.
Australia’s fiscal deficit for the year ending June 2025 stood at about $10 billion, compared to a much higher forecast of $27.9 billion from the Treasury, marking a significant reduction in the deficit.
Australian Dollar Advances as US Dollar Weakens Amid Rate Cut Expectations
- The US Dollar Index (DXY), which tracks the dollar against six other major currencies, has fallen below 98.00 as of this writing. Traders will also be looking for remarks from various Federal Reserve officials throughout Monday.
- The greenback is under pressure after August inflation data increased the chances of another Fed interest rate cut next month. Current market estimates indicate an almost 88% probability of a Fed reduction in October and a 65% chance of one in December.
- The Personal Consumption Expenditures (PCE) price index for the US rose 2.7% year-on-year in August, up from 2.6% previously, aligning with analysts’ expectations. Core PCE, excluding food and energy, also met forecasts at 2.9% for the same period last year.
- US President Donald Trump is slated to meet with Congressional leaders to discuss funding issues. A lack of resolution could align with new tariffs imposed on various goods, potentially delaying important economic data as well.
- President Trump has proposed imposing 100% tariffs on imported branded or patented drugs starting October 1, unless those companies establish manufacturing in the U.S. He also plans 50% tariffs on kitchen cabinets and 25% tariffs on trucks.
- US GDP increased by 3.8% in the second quarter, surpassing previous estimates of 3.3%. The GDP price index also saw a rise of 2.1%, in line with earlier expectations of 2.0% growth.
- An in-person meeting is scheduled for October 20 between Australian Prime Minister Anthony Albanese and President Trump in Washington, D.C. to discuss the Orcas Nuclear Submarine Agreement.
- Australia’s monthly consumer price index (CPI) saw a year-on-year increase of 3.0% in August, up from 2.8% in July. Market futures show only a 4% probability for interest rate reductions in September, with forecasts for the RBA in November dropping from nearly 70% to 50% after the recent data.
- RBA Governor Michele Bullock noted earlier this week that the labor market has softened, with rising unemployment. While recent interest rate reductions may support household and business spending, the RBA must stay alert to changing conditions.
Australian Dollar Moves Above 50-day EMA of 0.6550
The AUD/USD pair is trading around 0.6560 on Monday. Technical analysis indicates the pair is still within a downward channel pattern, suggesting bearish market sentiment. Additionally, the 14-day relative strength index (RSI) hovers just below the 50 level, reinforcing this bearish outlook.
If the AUD/USD drops, immediate support is at the 50-day exponential moving average (EMA) of 0.6550, followed by the channel’s lower boundary around 0.6500. A breach of this key support could heighten pressure, potentially pushing the pair towards the 3-month low of 0.6414 recorded on August 21.
Initial resistance is set at the 9-day EMA of 0.6579, with further resistance at 0.6590. A breakout from the channel could ease the bearish bias, allowing the pair to target the 11-month peak of 0.6707 seen on September 17.
AUD/USD: Daily Charts
The table below shows today’s rates for the Australian Dollar (AUD) compared to other major currencies. Overall, the AUD is performing strongest against the US dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.21% | -0.31% | -0.36% | -0.10% | -0.33% | -0.03% | -0.20% | |
| EUR | 0.21% | -0.10% | -0.31% | 0.11% | -0.12% | 0.17% | -0.01% | |
| GBP | 0.31% | 0.10% | -0.10% | 0.21% | -0.07% | 0.27% | 0.09% | |
| JPY | 0.36% | 0.31% | 0.10% | 0.30% | 0.07% | 0.20% | 0.20% | |
| CAD | 0.10% | -0.11% | -0.21% | -0.30% | -0.19% | 0.07% | -0.12% | |
| AUD | 0.33% | 0.12% | 0.07% | -0.07% | 0.19% | 0.29% | 0.11% | |
| NZD | 0.03% | -0.17% | -0.27% | -0.20% | -0.07% | -0.29% | -0.03% | |
| CHF | 0.20% | 0.00% | -0.09% | -0.20% | 0.12% | -0.11% | 0.03% |
The heatmap illustrates the rate of change among major currencies, with the base currency indicated in the left column and the comparison currency across the top. For instance, selecting AUD from the left column and moving across to USD will show the rate of change for AUD against USD.
