Aussie dollar climbs as markets pare back rate-cut bets
Written by
Daily Currency Update
The Australian dollar continued to build momentum against the US dollar on Thursday, gaining ground as traders reassessed their expectations for further interest-rate cuts from the Reserve Bank of Australia (RBA). By the time markets paused for breath, the AUD/USD pair was trading near 0.6611—its highest point since early October—and showing a level of confidence that has been missing in recent months. What’s driving the renewed strength? Much of it comes down to a shift in expectations ahead of the RBA’s next interest-rate meeting on December 9. Until recently, some investors had been bracing for the possibility of additional cuts, especially as global growth indicators softened. But domestic conditions in Australia are proving more resilient than expected, giving the central bank room to keep policy steady. The RBA held its cash rate at 3.60% in November, emphasising that it would take time to gauge how previous cuts are influencing the economy. Since then, new data has offered little justification for moving toward further easing. In fact, the latest numbers from the Australian Bureau of Statistics paint a picture of consumers who are still willing to spend, despite higher living costs and ongoing global uncertainty. Household spending jumped 1.3% in October, marking the strongest monthly increase since January 2024. The rebound was also a notable step up from September’s modest 0.3% rise. When compared to the same time last year, spending is now up 5.6%, showing that many households still feel secure enough to open their wallets. For policymakers, stronger spending reduces the urgency to stimulate the economy further, which in turn supports the currency. Adding to the upbeat tone, fresh trade data offered another boost to the Aussie. Exports rose by 3.4% month-on-month in October, powered by demand for key commodities. Imports also increased, rising 2.0%, which suggests that domestic activity remains healthy. Together, these shifts widened the country’s trade surplus to AU$4.385 billion, up from AU$3.707 billion the previous month. A larger trade surplus generally strengthens the Australian dollar by increasing demand for local currency, and this latest improvement arrived at just the right time to reinforce the market’s growing optimism. As investors look ahead to the RBA’s December meeting, the mood is increasingly aligned around the expectation that the central bank will keep its “wait-and-see” approach. For now, the combination of steady policy, solid spending and stronger trade figures has created a more supportive backdrop for the Aussie. Whether this upward trend continues will depend on global conditions and the tone the RBA strikes next week, but for the moment, the currency is enjoying a welcome lift in confidence.Key Movers
The US dollar had a rather directionless day on Thursday, moving within a narrow range as traders weighed mixed signals from global markets. The US Dollar Index (DXY), which measures the greenback against a basket of major currencies, briefly dipped into the 98.80–98.70 zone. That move put it at fresh multi-week lows, highlighting the cautious mood ahead of several important US economic releases. For much of the session, investors appeared content to hold their positions rather than make bold moves. With no major surprises on the data front, the dollar lacked the spark needed to mount a meaningful recovery. Still, the dips were limited, suggesting that the market is waiting for clearer direction before committing to any strong trend. That clarity may come soon. The week will wrap up with a series of high-impact US reports, topped by the Personal Consumption Expenditures (PCE) Price Index. This indicator is closely watched because it’s the Federal Reserve’s preferred measure of inflation. After months of mixed signals about whether price pressures are easing, traders are eager to see whether PCE confirms that inflation is cooling—or if it hints at renewed stickiness that could complicate the Fed’s future policy moves. Alongside the PCE report, markets will also receive fresh data on Personal Income and Personal Spending. These numbers offer valuable insight into the financial health of American households. Rising incomes typically support consumer spending, which in turn fuels broader economic growth. If the data shows that consumers are still spending confidently, it could bolster expectations of a resilient US economy. On the other hand, signs of weakening demand may spark concerns about a slowdown. Adding to the day’s mix will be the flash reading of the University of Michigan’s Consumer Sentiment Index. This survey gives a snapshot of how optimistic or cautious households feel about inflation, business conditions and their own financial outlook. Consumer sentiment has been fragile in recent months, so any notable shift—positive or negative—could influence currency markets as traders interpret what it means for future spending patterns. Finally, Factory Orders will round out the data set, offering clues about manufacturing activity. Though this report often flies under the radar, it helps flesh out the broader picture of economic momentum. With all these indicators landing together, Friday is shaping up to be a potentially decisive moment for the dollar. For now, however, the greenback remains in a holding pattern, dipped but resilient, waiting for the next set of clues that could define its direction heading into the new month.Expected Ranges
- AUD/USD: 0.6500 - 0.6700 ▲
- AUD/EUR: 0.5600 - 0.5800 ▲
- GBP/AUD: 2.0100 - 2.0300 ▼
- AUD/NZD: 1.1350 - 1.1550 ▼
- AUD/CAD: 0.9100 - 0.9300 ▲