Australian dollar slips as weak consumer sentiment and job data weigh on outlook
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Daily Currency Update
The Australian dollar (AUD) dropped by around 0.4% against the US dollar on Tuesday, as fresh economic data pointed to growing concerns about the health of the Australian economy. Two key indicators — consumer confidence and job advertisements — showed notable declines, raising doubts about the strength of household spending and employment prospects. The Westpac Consumer Confidence Index, which measures how optimistic or pessimistic people feel about their financial situation and the broader economy, fell sharply by 3.5% in October. The index dropped to 92.1, down from 95.4 in September, marking its largest monthly fall since April. A reading below 100 indicates that pessimists outnumber optimists, suggesting that many Australians are feeling less confident about the future. Adding to the downbeat tone, the latest figures from ANZ showed that job advertisements fell by 3.3% in September. This decline suggests that employers are becoming more cautious about hiring, possibly due to economic uncertainty or higher operating costs. Together, these signs of economic weakness support the Reserve Bank of Australia’s (RBA) decision to keep interest rates unchanged at its last meeting. The RBA held the Official Cash Rate (OCR) steady at 3.6%, while noting that inflation has been more persistent than expected. In other words, while prices are still rising too quickly, the central bank is also concerned about slowing growth and consumer strain. Looking ahead, investors and economists will be watching closely when RBA Governor, Michelle Bullock, appears before the Senate Economics Legislation Committee on Friday. Her comments may provide further insight into how the central bank plans to balance inflation control with the need to support the economy.Key Movers
At the time of writing, the US Dollar Index (DXY), which measures the Greenback’s performance against a basket of six major currencies, is up 0.25%, trading near the 98.35 level. The modest rise reflects a temporary uptick in demand for the US dollar; however, broader upside remains limited as markets continue to price in a dovish policy outlook from the Federal Reserve, coupled with concerns over a potential US government shutdown. Expectations for Fed rate cuts have gained momentum in recent weeks, driven by signs of a cooling labour market and steady consumer inflation expectations. Slowing job growth, rising unemployment claims, and softer wage pressures have all contributed to the view that the Fed may be nearing the end of its tightening cycle—or even preparing to pivot to rate cuts in the coming months. According to the CME FedWatch Tool, futures markets now assign an 81.5% probability that the Federal Reserve will lower interest rates at both of its remaining policy meetings in 2025. This marked shift in rate expectations reflects increasing confidence that inflation is under control, and that the central bank may now prioritise supporting growth and employment amid a weakening macroeconomic backdrop. In addition to dovish Fed bets, political gridlock in Washington has emerged as another headwind for the US Dollar. The risk of a prolonged government shutdown—triggered by budgetary standoffs in Congress—raises uncertainty around fiscal policy and could weigh on overall investor sentiment. A shutdown would disrupt key government services and data releases, potentially complicating the Fed’s decision-making process and reinforcing the case for caution. Taken together, these factors are expected to keep the US dollar’s rally in check, even as it posts short-term gains on safe-haven flows or relative strength against other major currencies. Going forward, traders will closely monitor upcoming US labour and inflation reports, as well as any developments in fiscal negotiations, for further clues on the Fed’s policy trajectory and the dollar’s direction.Expected Ranges
- AUD/USD: 0.6500 - 0.6700 ▼
- AUD/EUR: 0.5550 - 0.5750 ▼
- GBP/AUD: 2.0300 - 2.0500 ▲
- AUD/NZD: 1.1250 - 1.1450 ▲
- AUD/CAD: 0.9100 - 0.9300 ▼