Australian dollar climbs as strong domestic data and fed easing expectations boost momentum
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Daily Currency Update
The Australian dollar (AUD) has continued its steady climb against the US dollar (USD), buoyed by a global market backdrop that increasingly anticipates monetary easing from the US Federal Reserve (Fed). As expectations grow that the Fed may begin reducing interest rates sooner rather than later, investors have shifted toward risk-sensitive currencies, giving the Aussie dollar an extra lift. Fresh domestic economic data has added to this momentum. The Australian Bureau of Statistics (ABS) released its third-quarter private capital expenditure figures, revealing a robust 6.4% quarter-on-quarter surge. This result not only exceeded economists’ forecasts but also highlighted ongoing confidence among Australian businesses, particularly in sectors tied to investment and growth. Stronger-than-expected capital spending is often viewed as a sign of economic resilience, and this latest reading has helped reinforce support for the AUD. Inflation data also contributed to the currency’s upward trajectory. Australia’s first full monthly Consumer Price Index (CPI) update showed that annual inflation accelerated to 3.8% in October, surpassing market expectations. While the reading signals that price pressures remain sticky, it also underscores that inflation is yet to fall comfortably within the Reserve Bank of Australia’s (RBA) target band. This persistent inflation backdrop has strengthened the case for the RBA to maintain a cautious policy stance in the near term. With inflation proving stubborn and economic indicators remaining relatively solid, financial markets broadly expect the RBA to leave its cash rate unchanged at 3.6% when it meets in December. Policymakers have acknowledged a slight rise in the unemployment rate, yet they continue to view the labour market as fundamentally sound. Employment conditions, while easing marginally, still point to underlying stability—another factor that reduces the likelihood of imminent policy loosening. Given this mix of stronger domestic data and ongoing inflation concerns, market participants see little chance of a near-term rate cut from the RBA. In contrast, growing expectations of a more accommodative stance from the Fed create a favourable yield differential for the AUD. This divergence between central-bank outlooks remains one of the key drivers behind the Australian dollar’s recent gains. Overall, the combination of resilient local economic performance, sticky inflation and shifting global monetary expectations has created a supportive environment for the Aussie. While uncertainties remain, particularly regarding external demand and the global economic outlook, the near-term narrative favours a firm AUD as long as the RBA stays patient and the Fed leans toward easing.Key Movers
The US dollar (USD) continues to face downward pressure as shifting expectations around US monetary policy reshape market sentiment. Investors are increasingly convinced that the Federal Reserve (Fed) is preparing to adopt a more accommodative stance, with current pricing indicating an 84% likelihood of a 25-basis-point interest rate cut at the December meeting. This growing confidence in near-term easing has weighed on the greenback, encouraging traders to rotate toward higher-yielding or more growth-sensitive currencies. The change in market expectations follows a consistent run of data suggesting that inflation in the United States is gradually cooling and that overall financial conditions may allow the Fed to begin easing before the end of the year. As a result, investors are more cautious about holding the USD, which has benefited for much of the past year from the Fed’s tighter policy approach. The prospect of lower interest rates reduces the dollar’s yield advantage, diminishing its appeal in global currency markets. However, not all recent data has pointed toward cooling conditions. Fresh US labor market figures revealed a modest but notable improvement that could help slow the dollar’s decline. Initial Jobless Claims for the week ending November 22 fell by 6,000 to a seasonally adjusted 216,000, marking the lowest reading since April. This outcome surprised economists, who had expected claims to rise to around 225,000. The drop suggests that the US labor market remains resilient, even as broader economic momentum shows signs of easing. A stronger labor market can complicate the Fed’s policy path. While easing remains the market’s base-case scenario, the central bank continues to stress that decisions will depend on incoming data. If labor conditions remain firm or if wage pressures re-accelerate, policymakers may feel less urgency to cut rates as quickly as markets anticipate. This dynamic could help put a floor under the USD, limiting the extent of its near-term losses despite the prevailing bias toward Fed easing. For now, though, traders are focusing on the bigger picture: expectations of a December rate cut and the broader shift toward a more dovish Fed stance. As long as these expectations hold, the dollar is likely to remain on the back foot. In the coming weeks, attention will turn to key US inflation releases, employment figures and public remarks from Fed officials. Each of these will play a crucial role in shaping market assumptions and determining whether the USD can stabilise, or whether it will continue to drift lower heading into the end of the year.Expected Ranges
- AUD/USD: 0.6400 - 0.6600 ▲
- AUD/EUR: 0.5550 - 0.5750 ▲
- GBP/AUD: 2.0150 - 2.0350 ▼
- AUD/NZD: 1.1300 - 1.1500 ▼
- AUD/CAD: 0.9050 - 0.9250 ▲