The Australian dollar (AUD) declined against the US dollar (USD) on Monday, following a previous session of gains. The dip comes as the USD gained strength after US Federal Reserve officials made cautious comments, which seemed to lessen the likelihood of a rate cut in December.
Meanwhile, strong employment data from Australia has bolstered expectations for the Reserve Bank of Australia’s (RBA) careful approach, providing some support for the AUD. As of November 14, the ASX 30-day interbank cash rate futures for December 2025 were trading at 96.41, which indicates a 6% probability of a rate cut from 3.60% to 3.35% at the upcoming RBA board meeting.
Last week, RBA Deputy Governor Andrew Hauser mentioned, “Our best expectation is that monetary policy remains restrictive, but the committee continues to discuss this.” He noted that if policy were to become less than mildly restrictive, it could significantly affect future choices.
On Sunday, Reuters reported that US Treasury Secretary Scott Bessent expressed hope that a deal related to rare earths between the US and China could be finalized “hopefully” by Thanksgiving. He showed confidence that China would maintain its commitments following a recent meeting between Presidents Trump and Xi Jinping in South Korea.
US dollar gains strength amid lower Fed cut expectations
- The US Dollar Index (DXY), which gauges the USD against six major currencies, has been rising, trading near 99.40 at the moment. Traders are preparing for a potential downturn in U.S. data following the government’s reopening.
- Currently, financial markets reflect a 46% chance that the Fed will cut the benchmark overnight borrowing rate by 25 basis points (bps) in December, down from a 67% chance noted a week earlier, as per the CME FedWatch tool.
- Kansas City Fed President Jeffrey Schmidt remarked on Friday that monetary policy might need to “lean toward demand growth,” emphasizing that the current Fed position is “moderately restrictive,” which he believes is suitable.
- National Economic Council Director Kevin Hassett cautioned that October’s data could “never materialize,” given that some governmental agencies faced difficulties gathering information during the shutdown. Initial private sector reports indicate a slowing labor market, faltering consumer confidence, and ongoing inflation concerns.
- President Trump signed a funding bill on Thursday, officially concluding the record 43-day government shutdown in U.S. history.
- St. Louis Fed President Alberto Moussallem stated Thursday that interest rates are closer to neutral than restrictive, with the U.S. economy remaining strong. He emphasized exercising caution since there’s limited room for easing without risking overly loose policies.
- Minneapolis Fed President Neel Kashkari spoke at a research conference, pointing out that some segments of the labor market seem pressured, and the economy is providing mixed messages. He flagged that inflation is still too high at 3%.
- Employment data from Automatic Data Processing (ADP) released on Tuesday showed an average weekly loss of 11,250 jobs during the four weeks ending October 25. The weaker US private labor figures raise the possibility of Federal Reserve policy easing. Challenger Gray & Christmas revealed that U.S. employers cut 153,074 jobs in October, surpassing the 55,597 job cuts reported for October 2024.
- According to China’s National Bureau of Statistics, retail sales in China rose 2.9% year-on-year in October, surpassing the expected 2.7% increase, although a decrease from September’s 3.0% growth. Meanwhile, industrial production in the same month grew 4.9% year-on-year, below the anticipated 5.5% increase and the prior estimate of 6.5%. Fixed asset investment for October was -1.7% year-to-date, missing predictions of -0.8% and falling short of September’s -0.5%.
- At a press conference on Friday, the National Bureau of Statistics shared its economic outlook, stating a commitment to developing new productive capacities. The report indicated a return to positive territory for the Consumer Price Index (CPI) in October, backed by higher prices for services and industrial goods, along with improved supply and demand dynamics. The bureau added that consistent economic stability lays a solid groundwork for China to meet its full-year growth targets.
- The unemployment rate for October in Australia dropped to 4.3% from 4.5% in September, contrary to market expectations of 4.4%. Employment increased by 42,000 that month, a rise from 12,000 previously (revised from 14,900), and significantly above the market forecast of 20,000.
- Full-time employment in Australia saw an increase of 55,000 in October, marking an improvement from the previous count of 6,500 (revised from 8,700). Although the participation rate held steady at 67%, part-time employment fell by 131,000 in October, compared to a slight increase of 6,300 individuals noted earlier.
Australian dollar stabilizes near 9-day EMA
The AUD/USD pair was trading at about 0.6520 on Monday. Daily chart analysis suggests the pair is consolidating within a rectangular range, indicating a sideways movement. Prices are lingering around the 9-day exponential moving average (EMA) which hints at stabilizing momentum.
There’s a potential for the AUD/USD pair to try reaching the rectangle’s upper limit around 0.6630. A definitive break above this mark could signal a bullish shift and set the stage for a rally towards the 13-month peak of 0.6707, last seen on September 17.
On the downside, significant support is situated at the rectangle’s lower edge near 0.6470, followed by a five-month low of 0.6414 recorded on August 21.
