Australian dollar eases as markets await inflation data and Fed rate-cut signals
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Daily Currency Update
The Australian dollar is trading a touch softer this morning, sitting around US$0.6468 at the time of writing. This modest pullback follows two consecutive days of gains, with traders showing a slightly more cautious attitude ahead of Wednesday’s release of Australia’s newly expanded Consumer Price Index (CPI). While the updated CPI series offers a broader picture of price movements, the Reserve Bank of Australia (RBA) has made it clear that it is not yet assigning heavy weight to this revamped measure. Instead, policymakers—and markets—are paying closer attention to developments in housing and services inflation, which they believe offer a more reliable gauge of underlying price pressures. For now, any downside in the AUD/USD pair appears limited. The US Dollar continues to soften, helping to cushion the Australian dollar against more pronounced losses. This decline in the greenback comes as expectations of a December rate cut by the Federal Reserve gain momentum. A series of recent comments from Fed officials has leaned on the dovish side, signalling a growing openness to policy easing should inflation continue to move toward target. In response, market pricing has shifted notably. According to the CME FedWatch tool, traders now see an 81% chance of a 25-basis-point rate cut at the Fed’s December meeting—up from 71% just a day earlier. That jump reflects not only a change in tone from policymakers but also a broader sense that the US economy may no longer require the same level of restrictive rates. This dynamic—softer US dollar, cautious optimism in Australia, and heightened sensitivity to inflation data—sets the stage for potentially choppy trading in the days ahead. For Australian dollar watchers, Wednesday’s CPI release could provide valuable insight, even if the RBA itself is still calibrating how to incorporate the expanded series into its policy framework. Market participants will be looking for signs of whether price pressures in housing and services are easing in a meaningful way, which could shape expectations for future RBA decisions. In the meantime, the mix of a slightly weaker US dollar and steady domestic fundamentals may help keep the AUD/USD pair relatively well-supported. While traders may hesitate to take bold positions ahead of key data, the broader backdrop suggests that sentiment toward the Australian dollar remains cautiously constructive. As always, upcoming economic releases and central-bank commentary will likely play an outsized role in determining the pair’s next move.Key Movers
Recent US economic data offered fresh evidence that inflation pressures continue to ease, strengthening the narrative of mild disinflation heading into the end of the year. The latest Producer Price Index (PPI) numbers painted a calm picture, with no major surprises for markets. Headline PPI rose 2.7% year over year, matching expectations, while core PPI, which strips out volatile food and energy components, slowed slightly to 2.6%. On a monthly basis, inflation appeared even more contained: headline PPI increased 0.3%, and core PPI came in at a modest 0.1%. Both readings were viewed as comfortably benign, reinforcing the idea that pipeline price pressures are gradually cooling. Retail data, however, provided a less encouraging snapshot of consumer behaviour. US Retail Sales for September rose just 0.2%, falling short of the 0.4% gain economists had anticipated. While still positive, the softer reading suggests that consumers may be becoming more cautious, particularly as borrowing costs remain high and savings buffers continue to thin. The report has led analysts to dial back expectations for fourth-quarter economic momentum, with many now anticipating a period of more moderate growth. Sentiment indicators also pointed to a shift in mood among American households. The Conference Board’s Consumer Confidence Index experienced a sharp drop in November, falling to 88.7 from 95.5 in the previous month. This decline reflects growing concerns about the economic outlook, personal finances, and the labour market. According to the Conference Board’s Chief Economist, Dana Peterson, all five components of the index weakened in the latest reading. Notably, the labour market differential—a measure comparing the share of households saying jobs are plentiful versus hard to get—deteriorated once again, suggesting that workers may be feeling less secure about job prospects. Peterson also highlighted that consumer expectations for the months ahead have become “notably more pessimistic,” a shift that could have meaningful implications for household spending. With sentiment softening and inflation easing, consumers appear increasingly wary of the economic landscape, and this collective caution may influence spending patterns as the holiday season approaches. Together, the latest inflation, retail, and sentiment data create a picture of an economy still growing but losing some of the strong momentum seen earlier in the year. For policymakers, the moderation in price pressures may provide comfort, while the weakening in consumer confidence could signal the need for vigilance as domestic demand shows signs of cooling. Markets, for their part, are likely to interpret this mix as supportive of a more patient Federal Reserve, keeping expectations for future policy moves firmly in focus.Expected Ranges
- AUD/USD: 0.6350 - 0.6550 ▼
- AUD/EUR: 0.5500 - 0.5700 ▼
- GBP/AUD: 2.0250 - 2.0450 ▲
- AUD/NZD: 1.1400 - 1.1600 ▲
- AUD/CAD: 0.9000 - 0.9200 ▼