Aussie dollar edges higher as US dollar slips and RBA keeps rates on hold
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Daily Currency Update
The Australian dollar (AUD) maintains its upward momentum against the US dollar (USD), with the AUDUSD pair hovering near US$0.6620 during Wednesday’s European trading session. The pair's resilience reflects a combination of persistent US dollar weakness and cautious optimism surrounding Australia’s monetary policy outlook. The US dollar continues to face broad-based selling pressure as political uncertainty in Washington escalates. Concerns over a potential government shutdown have weighed heavily on investor sentiment, prompting a flight away from the greenback. This has provided support to higher-yielding and risk-sensitive currencies like the Australian dollar. However, despite Tuesday’s gains, the Aussie has struggled to build further momentum, reflecting a degree of market hesitation following the Reserve Bank of Australia’s (RBA) latest policy announcement. On Tuesday, the RBA opted to keep its Official Cash Rate (OCR) unchanged at 3.60%, in line with market expectations. While the decision was widely anticipated, the RBA's tone was notably cautious, signalling no immediate urgency to cut interest rates amid lingering inflation concerns. RBA Governor Michele Bullock emphasised that inflationary pressures remain a key concern, even as overall price growth shows signs of moderating. “Components of the monthly Consumer Price Index (CPI) are a little higher than expected,” Bullock noted, adding that while inflation is not “running away,” it may prove more persistent in the near term than previously thought. The RBA’s stance underscores a delicate balancing act: maintaining policy stability while keeping inflation expectations anchored. Markets are now closely watching incoming economic data, particularly inflation and labour market indicators, for further clues on the central bank’s next moves. In the near term, the AUDUSD pair is likely to remain sensitive to developments in both US fiscal policy and Australian economic data. With the US government facing a possible shutdown and the Federal Reserve showing increasing signs of policy divergence, volatility in the currency markets may persist.Key Movers
At the time of writing, the US Dollar Index (DXY), which measures the USD's performance against a basket of six major currencies, has declined to trade near 97.70. The pullback comes amid growing uncertainty surrounding the ongoing partial US government shutdown, which entered effect late Tuesday after Republicans failed to secure Democratic support for a short-term funding bill in the Senate. The proposed bill sought to extend government funding until November 21 but was ultimately rejected. The partial shutdown has significant implications for financial markets and the Federal Reserve’s (Fed) upcoming monetary policy decision scheduled for later this month. With many key economic data releases likely to be delayed or halted—most notably the closely watched Nonfarm Payrolls report—the usual flow of economic indicators that inform Fed policy decisions will be disrupted. This has elevated the importance of alternative labour market data, such as the ADP Employment Change report for September. Investors and analysts will be closely monitoring the ADP report, as it may provide critical insights into employment trends in the absence of official government data. The disruption from a partial shutdown adds an extra layer of uncertainty to the Fed’s outlook, with markets wary of how a lack of reliable data might affect the Fed’s ability to assess the economy’s health and calibrate policy stance. As the US government remains partially closed, the USD's performance is likely to stay volatile, driven by political developments and any updates on the funding impasse. Market watchers will be particularly attentive to any progress toward reopening the government, which could restore confidence and stabilise the currency.Expected Ranges
- AUD/USD: 0.6500 - 0.6700 ▲
- AUD/EUR: 0.5500 - 0.5700 ▲
- GBP/AUD: 2.0300 - 2.0500 ▼
- AUD/NZD: 1.1200 - 1.1400 ▲
- AUD/CAD: 0.9100 - 0.9300 ▲