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AUD/USD climbs on robust Australian inflation, Fed rate cut expectations

  • AUD/USD advances for a fourth straight session, supported by stronger-than-expected Australian inflation.
  • The upside surprise in Australian CPI reinforces the RBA’s cautious stance, while markets increase bets on a Fed rate cut.
  • The US Dollar weakens as softer economic data and dovish comments from Fed officials boost expectations of imminent easing.

AUD/USD strengthens on Wednesday, trading around 0.6500, up 0.45% on the day at the time of writing, after Australia’s new “complete” monthly inflation measure surprised to the upside. The Australian Bureau of Statistics (ABS) reported that the Consumer Price Index (CPI) accelerated to 3.8% YoY in October, above market expectations of 3.6% and the previous 3.5%. The stronger reading highlights the persistence of price pressures, a factor likely to keep the Reserve Bank of Australia (RBA) cautious ahead of its December policy decision.

RBA officials have recently emphasized that, although labor market conditions have softened slightly, overall employment remains healthy, reducing the urgency for monetary easing.

Minutes from the November meeting confirmed the central bank’s preference to keep the cash rate at 3.6% for an extended period as long as inflation remains above the 2%-3% target. This stance is in line with comments from Assistant Governor Sarah Hunter, who warned that monthly inflation data can be volatile and that a single reading will not trigger a policy reaction.

In the United States (US), the US Dollar (USD) continues to struggle, weighed down by signs of economic deceleration. The US Dollar Index (DXY) holds near 99.80 at the time of writing, after modest declines, pressured by growing expectations of a Federal Reserve (Fed) rate cut in December.

According to the CME FedWatch tool, the chance of a 25-basis-point reduction now exceeds 84%, up from 50% just one week ago. September Producer Price Index (PPI) data showed easing core inflation, while consumer spending has begun to cool, with Retail Sales rising only 0.2% MoM. Meanwhile, consumer sentiment deteriorated sharply, with the Conference Board’s Consumer Confidence Index dropping to 88.7 in November.

Several Fed officials, including Governor Christopher Waller and Federal Reserve Bank of New York President John Williams, signaled that conditions may justify rate cuts in the near term, citing a weakening labor market and softer underlying inflation. Fed Governor Stephen Miran also expressed support for a December cut, adding that he would vote for a 25-bp reduction if decisive.

Against this backdrop of persistent inflation in Australia and increasing signs of slowdown in the United States, the Australian Dollar maintains a short-term bullish bias against the US Dollar. Shifts in monetary-policy expectations are likely to remain the main driver of AUD/USD in the coming days as markets look ahead to fresh US macroeconomic data.

Australian Dollar Price Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.

USDEURGBPJPYCADAUDNZDCHF
USD-0.07%-0.00%0.23%-0.11%-0.38%-0.91%-0.12%
EUR0.07%0.07%0.31%-0.04%-0.31%-0.83%-0.05%
GBP0.00%-0.07%0.23%-0.10%-0.38%-0.90%-0.11%
JPY-0.23%-0.31%-0.23%-0.35%-0.62%-1.14%-0.35%
CAD0.11%0.04%0.10%0.35%-0.28%-0.81%-0.01%
AUD0.38%0.31%0.38%0.62%0.28%-0.53%0.27%
NZD0.91%0.83%0.90%1.14%0.81%0.53%0.80%
CHF0.12%0.05%0.11%0.35%0.01%-0.27%-0.80%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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