The Australian Dollar Gains Against the US Dollar

On Wednesday, the Australian dollar (AUD) experienced an increase against the US dollar (USD), marking its fourth consecutive session of gains. The AUD/USD pair has managed to maintain its position following the Australian Bureau of Statistics (ABS) releasing its inaugural “complete” monthly consumer price index (CPI), which showed a year-on-year (YoY) rise of 3.8% in October. This surpassed market expectations, which had predicted a 3.6% increase, as well as the previous 3.5% figure.

The rise in the Australian dollar may be influenced by the cautious sentiment surrounding the Reserve Bank of Australia’s (RBA) policy outlook. Analysts anticipate that the RBA will keep the official cash rate (OCR) steady at 3.6% come December, particularly since inflation is still above their target range of 2-3%. RBA officials have noted that even with a slight uptick in the unemployment rate, the jobs market remains robust and is expected to stay that way.

Minutes from the RBA’s November meeting indicate the central bank could maintain interest rates for an extended period. According to the ASX’s 30-day interbank cash rate futures, the December 2025 contract was trading at 96.41 as of November 25, suggesting a mere 6% chance that rates will be lowered from 3.60% to 3.35% in the next meeting.

US Dollar Faces Challenges Amid Fed Rate Cut Speculation

• The US Dollar Index (DXY), which assesses the value of the US dollar against six other major currencies, remained steady after experiencing minor losses earlier, trading around 99.80. The dollar is facing hurdles as expectations elevate that the Federal Reserve might reduce interest rates in December due to disappointing US economic data.
• Currently, the markets are pricing in an over 84% likelihood that the Fed will lower the benchmark overnight borrowing rate by 25 basis points (bps) during its December meeting. This is a notable increase from the 50% expectation merely a week ago, as shown by the CME FedWatch tool.
• The U.S. producer price index (PPI) remained unchanged at 2.7% YoY in September, aligning with both expectations and August’s numbers, which implies stabilizing inflationary pressures. Notably, core PPI dipped to 2.6% from 2.9%, falling below the anticipated 2.7%.
• In terms of retail, U.S. sales increased by 0.2% month-on-month in September, a slowdown from the 0.6% rise in August, suggesting consumers are becoming more cautious with their spending. Additionally, the Conference Board reported a significant drop in household sentiment, as the consumer confidence index fell by 6.8 points to 88.7 in November.
• Federal Reserve President Christopher Waller expressed concern about a weakening labor market, stating inflation isn’t currently a primary issue given the recent trend in employment. He also mentioned that revisions to September’s payroll numbers are likely downward, warning that concentrated hiring could signal broader issues and support short-term rate cuts.
• On another note, New York Fed President John Williams recently indicated that interest rate cuts could occur “in the near term,” which could bolster rates’ outlook for December. Additionally, Fed Director Stephen Millan noted that non-farm employment data supports a December rate cut, suggesting he would favor a 25 bps decrease if his vote were active.
• Australia’s preliminary S&P Global Manufacturing Purchasing Managers Index (PMI) for November registered at 51.6, up from 49.7. The services PMI also rose, inching up to 52.7 from 52.5, while the comprehensive PMI improved to 52.6 from 52.1.
• The RBA’s minutes from its November meeting hinted at a balanced policy approach, indicating the cash rate might remain unchanged for an extended duration if future data proves more favorable than anticipated.
• “If growth continues above the trend, it could escalate inflationary pressures,” remarked RBA Assistant Governor Sarah Hunter. He cautioned that monthly inflation numbers can be fluctuating and the bank does not typically react to them alone. Additionally, the RBA is carefully examining labor market dynamics to understand supply capacity over time.

Potential for AUD to Reach 0.6500 Following Break Above 9-Day EMA

On Wednesday, the AUD/USD pair was trading near 0.6480. Daily charts indicate that the pair is staying within a rectangular consolidation area, suggesting a neutral outlook. It still lags behind its 9-day exponential moving average (EMA), which denotes subdued upward momentum in the near term.

AUD/USD has immediate support near the lower bound around 0.6420, followed by a five-month low of 0.6414 reached on August 21.

On the upside, the pair is currently near its 9-day EMA at 0.6479. If it manages to break above this moving average, it could potentially test the psychological threshold of 0.6500. Beyond that, it may approach the upper limit of the rectangle near 0.6630.

Current Performance of the Australian Dollar

Today’s movements show that the Australian dollar has been especially strong against the Japanese yen, revealing a varied performance against other major currencies.