On Friday, the Australian dollar (AUD) regained some strength against the US dollar (USD) after experiencing a couple of days of decline. This increase in the AUD/USD pairing came shortly after the preliminary findings from Australia’s S&P Global Purchasing Managers’ Index (PMI) were released.
Specifically, the S&P Global Manufacturing PMI for November was reported at 51.6, which is an improvement over the previous figure of 49.7. Meanwhile, the services PMI also saw a slight rise to 52.7 from 52.5 last month, with the overall PMI increasing to 52.6 in November from 52.1 a year prior.
The Australian dollar has been bolstered by a growing belief in a cautious approach from the Reserve Bank of Australia (RBA). Recent minutes from the RBA’s November meeting suggested a possibility of maintaining interest rates for a longer timeframe if economic indicators show ongoing improvement.
“Continued above-trend growth could raise inflationary pressures,” RBA Assistant Governor Sarah Hunter mentioned on Thursday. She pointed out that monthly inflation reports can be erratic, and the central bank doesn’t typically respond to data from just one month.
As of November 18, the December 2025 contract was priced at 96.41, per ASX 30-day interbank cash rate futures. This implies an 8% likelihood of a rate decrease from 3.60% to 3.35% at the RBA’s next meeting.
US Dollar Declines Amid Heightened Anticipation for Fed Rate Cut
- The US Dollar Index (DXY) fell, ending a five-day winning streak, hovering around 100.10 as traders awaited US S&P Global PMI results later in the North American session.
- The dollar weakened following September’s jobs report, which fueled speculation that the Federal Reserve might consider lowering interest rates come December. Current market assessments suggest a 36% chance the Fed will cut the overnight borrowing rate by 25 basis points (bps) at its December meeting, up from the previous 30% likelihood noted a day earlier, according to the CME FedWatch tool.
- In September, US nonfarm payrolls (NFP) saw an increase of 119,000 jobs, a stark contrast to August’s revised decline of 4,000 (originally reported as a gain of 22,000). This figure surpassed market predictions of a 50,000 increase.
- The unemployment rate in the US edged up to 4.4% in September, rising from 4.3% in August, while average hourly wages remained steady at an annual increase of 3.8%, slightly ahead of market expectations of 3.7%.
- Minutes from the Fed’s October 28-29 FOMC gathering revealed a cautious and divided outlook among officials regarding interest rate paths. While many suggested further rate reductions could be necessary over time, some argued against the suitability of a December cut.
- Currently, there’s a 40% chance priced in for a 25 bps cut at the Fed’s December meeting, down from the prior week’s 50% prediction, as per the CME FedWatch tool.
- Richmond Fed President Thomas Barkin commented on Tuesday that the labor market seems better balanced, noting companies’ improved employee retention and recent layoffs represent a cautious need. He stated that while inflation is not showing signs of rising, it’s uncertain whether it will return to the Fed’s target of 2%. Without clearer data, reaching a consensus on policy remains challenging.
- In an Oval Office interview on Tuesday, US President Donald Trump expressed a desire to oust Federal Reserve Chairman Jerome Powell immediately. Trump suggested he already had a suitable replacement in mind, mentioning that “some surprising names” were considered, but alluding to potentially opting for a more traditional choice.
- The People’s Bank of China announced on Thursday that it would maintain the loan prime rate (LPR) for November, keeping the one-year LPR at 3.00% and the five-year LPR at 3.50%. Given that China and Australia are closely linked through trade, the Chinese rates might influence the value of the Australian dollar.
- Australia’s adjusted wage price index increased by 0.8% in the third quarter, unchanged from the previous quarter and aligned with expectations. Year-over-year, wages rose at a 3.4% rate, consistent with both past performance and market forecasts.
- Minutes from the RBA’s November monetary policy meeting, released Tuesday, indicated a more balanced view from board members, suggesting that the cash rate could stay on hold for an extended period if data turns out to be stronger than anticipated.
AUD Rebounds from the Lower Bound Around 0.6550
The AUD/USD pair was trading around 0.6450 on Thursday. Analysis of daily charts indicates that the pair has been moving sideways, suggesting a phase of price consolidation. Moreover, the pair remains below the 9-day exponential moving average (EMA), indicating a lack of strong short-term momentum.
For support, the AUD/USD pair has immediate backing at the lower edge of this range around 0.6440, followed by a five-month low of 0.6414 set on August 21.
The first resistance level is at the 9-day EMA at 0.6487, and then there’s a psychological milestone at 0.6500. A breakout above this resistance area could enhance short-term momentum and push the pair toward the upper range limit around 0.6630.
