Australian dollar gains slightly on risk-on sentiment and trade optimism
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Daily Currency Update
The Australian dollar (AUD) showed modest strength on Wednesday, trading slightly higher against the US dollar (USD) with the AUDUSD pair hovering near the US$0.6500 mark. This mild rally was largely driven by an improving global risk sentiment. Investors are welcoming more constructive developments in trade relations between the United States and China. These signs of progress—though still tentative—have helped lift market confidence and supported risk-sensitive currencies like the Australian dollar, which tends to benefit when global economic prospects look more stable. In contrast, the US dollar has taken a more cautious stance, with market participants awaiting key domestic data before making decisive moves. The greenback’s subdued tone reflects a degree of uncertainty around the direction of US monetary policy and inflation trends, especially with several important economic releases on the horizon. Looking ahead, traders and analysts alike are closely watching upcoming economic indicators that could shape short-term movements in the AUDUSD exchange rate. In Australia, preliminary Purchasing Managers’ Index (PMI) figures for October are due out on Thursday. These early-month surveys provide a timely snapshot of business activity across the manufacturing and services sectors. Stronger-than-expected numbers could suggest solid momentum in the economy as the final quarter of the year gets underway. This, in turn, might influence expectations regarding the Reserve Bank of Australia's (RBA) policy stance going forward—especially as the central bank continues to assess inflationary pressures and labour market trends. Meanwhile, across the Pacific, all eyes are on Friday’s release of the US Consumer Price Index (CPI) for September. This is arguably the most important data point of the week for global markets. A hotter-than-expected inflation reading could reignite speculation about further interest rate hikes from the Federal Reserve, potentially providing renewed support for the US dollar. Conversely, a softer number might strengthen the case that the Fed has reached the end of its tightening cycle, which could weigh on the USD and benefit currency pairs like AUDUSD. For now, the AUDUSD pair continues to trade within a relatively narrow range, as market participants adopt a wait-and-see approach ahead of these data releases. The near-term direction of the pair will likely be guided by how investors interpret the upcoming economic indicators and their potential implications for central bank policy on both sides of the Pacific. While broader themes such as global trade dynamics and geopolitical tensions remain in the background, short-term trading in the Australian dollar will likely hinge on how this week’s data affects expectations for the RBA and the Fed. With volatility potentially on the horizon, traders should stay alert and be prepared for possible market-moving headlines in the days ahead.Key Movers
The British Pound (GBP) came under renewed selling pressure on Wednesday, falling sharply against its major counterparts following the release of softer-than-expected UK inflation data for September. The report dampened expectations for further interest rate hikes by the Bank of England (BoE) and reinforced the view that policy tightening may have peaked. According to the latest figures from the Office for National Statistics (ONS), the UK’s core Consumer Price Index (CPI)—which strips out volatile items such as food, energy, alcohol, and tobacco—rose by 3.5% year-on-year, undershooting both the market forecast of 3.7% and the previous reading of 3.6%. The moderation in core inflation signals that underlying price pressures are continuing to ease, albeit gradually. Meanwhile, headline CPI inflation also came in below expectations, rising by 3.8% annually compared to the 4.0% forecast. On a month-over-month basis, consumer prices were unchanged, following a 0.3% increase in August. The flat monthly figure adds to the growing evidence that inflationary momentum is cooling across the UK economy. Notably, services inflation—a key gauge closely monitored by the Bank of England due to its sensitivity to wage growth—remained steady at 4.7%. While still elevated, the lack of acceleration in services prices may offer some reassurance to policymakers that inflation risks are gradually subsiding. The softer inflation print comes at a critical time for the UK economy, which is grappling with sluggish growth, tight financial conditions, and signs of strain in the labour market. The Bank of England held interest rates steady in its last meeting and has signalled a cautious, data-dependent approach going forward. In the wake of the inflation data, markets have pared back bets on further tightening, with swap pricing suggesting the BoE is likely at the end of its hiking cycle. As a result, the pound weakened across the board, notably against the US dollar and the euro, as investors reassessed the UK’s monetary policy outlook.Expected Ranges
- AUD/USD: 0.6400 - 0.6600 ▲
- AUD/EUR: 0.5500 - 0.5700 ▼
- GBP/AUD: 2.0500 - 2.0700 ▲
- AUD/NZD: 1.1200 - 1.1400 ▲
- AUD/CAD: 0.9000 - 0.9200 ▼