Australia FX Today: Aussie awaits decisive RBA rate decision

The Australian Dollar (AUD) is consolidating against the US Dollar (USD) on Friday, with the AUD/USD pair stabilizing around 0.6530 after its recent fall.

Investors are watching the Reserve Bank of Australia (RBA) monetary policy meeting scheduled for Tuesday at 04:30 GMT. After three rate cuts this year, the consensus is for a status quo at 3.6%, while inflation rebounded in August to 3.0% YoY.

The currency markets are displaying a degree of caution, between hopes of monetary easing between now and November and persistent uncertainties over price trends. For the time being, the watchword is clear: wait for the central bank's signal.

Macroeconomic factors at play in Australia

Inflation remains at the heart of the decision of the RBA. According to the Australian Bureau of Statistics, the Consumer Price Index (CPI) accelerated to 3.0% YoY in August after 2.8% in July. While this increase remains within the RBA's target band of 2%-3%, it revives doubts about rapid easing.

"The Board can afford to wait for the full third-quarter figures before acting, so as not to reignite price pressures prematurely," sums up Sunny Kim Nguyen, head of Australian economics at Moody's Analytics, quoted by Reuters.

The unemployment rate edged up to 4.2% in August, according to the Australian Bureau of Statistics (ABS). The number of full-time jobs declined, partly offset by an increase in part-time positions, reflecting a shift in the market.

For RBA Governor Michele Bullock, the labor market remains "still relatively tight by pre-COVID standards", but the trend is clearly toward easing. This factor argues for a rate cut in the near future if the slowdown continues.

Australian growth is now expected to be 1.7% in 2025 by the Commonwealth Bank, compared with 2.1% previously. The economic slowdown strengthens the case for monetary support. As Aussie's Claire Montejo noted, "even a 25 basis point movement on the cash rate can represent hundreds of dollars a year difference on mortgages". Social pressure on the RBA is therefore real.

The language of the RBA: Caution and patience

In her address to Parliament in Canberra, Michele Bullock recalled: "We have made real progress in tackling inflation. But our role is to ensure that it stays on target sustainably, not just temporarily."

This stance underlines the Bank's determination to avoid any precipitation. The RBA has already cut its key rate by 75 basis points since February. It now prefers to assess the delayed effect of these cuts on the economy.

As for the forecasts of the major banks, CBA and Westpac anticipate a status quo in September and a further rate cut of 25 basis points in November, with an accommodating but cautious bias.

ANZ remains more reserved, believing that the rate cut scenario will depend heavily on Q3 inflation figures and the labor market.

NAB has tightened its forecast and now sees rates unchanged until May 2026, believing that services inflation is "significantly hotter than expected".

As MPA's William Farrington notes, the forecasts should be taken "with a healthy dose of skepticism" since the RBA has surprised the market this year.

Technical analysis of AUD/USD: Bearish bias strengthens

AUD/USD 4-hour chart. Source: FXStreet.

The Aussie's bearish reversal from the 0.6707 peak took another step forward on Thursday, as AUD/USD broke through the 0.6580 level, previously a support.

The break triggered a rapid acceleration to a new low of 0.6520 on Friday, followed by an attempt at intraday stabilization before the weekend.

However, the short-term bias remains to the downside, and a pullback below the recent low at 0.6520 could accentuate the downward pressure.

On the upside, a break above 0.6545 could encourage a stronger rebound, but it will probably take strong momentum and a catalyst to enable AUD/USD to regain 0.6580, which could play the role of resistance.