Australian dollar slips as US dollar strengthens ahead of RBA Governor speech
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Daily Currency Update
The Australian dollar (AUD) weakened on Thursday, trading at US$0.6548 against the US dollar (USD), marking a 0.50% decline at the time of writing. The move comes as the Aussie gives up earlier gains, pressured by renewed strength in the Greenback. The US Dollar Index (DXY), a measure of the USD’s performance against a basket of major currencies, rebounded sharply and is currently hovering near a two-month high around 99.50.Market sentiment appears to be shifting in favour of the USD as traders reassess expectations around interest rate trajectories and macroeconomic resilience in the United States. The dollar’s recovery follows a pullback earlier in the week, and its resurgence has weighed on risk-sensitive currencies like the AUD.
Focus now turns to a key speech by Reserve Bank of Australia (RBA) Governor Michele Bullock, who is scheduled to speak at 22:00 GMT. Her remarks are expected to provide insights into the central bank's current thinking on inflation and interest rate policy. While the RBA left its official cash rate unchanged at 3.60% at its most recent meeting, it also acknowledged that progress on bringing inflation back within target has been slower than expected.
Adding to the concern, fresh data from the University of Melbourne showed a slight uptick in inflation expectations. One-year Consumer Inflation Expectations rose to 4.8% in October, up from 4.7% in September. While modest, this increase suggests that inflationary pressures remain embedded, raising the possibility that the RBA may need to maintain a more vigilant stance.
Analysts are watching closely to see whether Governor Bullock signals a shift in tone, either toward greater patience or potential tightening. A more hawkish tilt could lend short-term support to the Australian dollar, but absent a clear signal, the AUD may remain under pressure, especially amid a broadly stronger USD environment.
In the near term, the AUD/USD pair is likely to stay fragile, with its direction hinging on a combination of domestic central bank commentary and broader global risk sentiment. Traders and investors will be parsing Governor Bullock’s comments for any indication of the RBA’s next move, as well as monitoring US data and geopolitical developments that could further sway currency markets.
Key Movers
The US dollar may come under pressure in the coming weeks as signs grow that the Federal Reserve could begin cutting interest rates sooner than previously expected. Minutes from the Federal Open Market Committee’s (FOMC) September meeting, released earlier this week, revealed that many policymakers are now considering additional rate cuts before the end of the year. According to the CME FedWatch Tool, market participants are pricing in a 92.5% chance of a 25 basis point rate cut at the Fed’s October meeting, and a 78% chance of another cut in December.This marks a shift in sentiment, as previous expectations leaned more toward holding rates steady to fight inflation. In the meeting summary, Fed officials expressed concerns about the broader economic outlook. While inflation has been slowing, several members pointed out that financial conditions may not be tight enough to bring inflation down sustainably. Some also noted that the risk of rising unemployment has increased, suggesting the need for a more balanced approach to monetary policy.
Looking ahead, the Fed signalled it could continue easing policy through the remainder of 2025 if economic conditions warrant it. This potential shift in stance has caused investors to re-evaluate their positions in the currency and bond markets, as a more dovish Fed typically weighs on the US dollar.
Adding to the uncertainty is the ongoing US government shutdown, which has now entered its ninth day. The political deadlock in Washington shows no sign of resolution, with the Senate on Wednesday rejecting rival funding proposals from both Republicans and Democrats. The prolonged shutdown raises concerns about its impact on government services, economic data releases and overall market confidence. For traders and investors, this combination of potential rate cuts and political gridlock is a reminder to remain cautious.
Market volatility could increase in the coming days as attention turns to upcoming economic data and comments from key Fed officials, including Chair Jerome Powell.
Expected Ranges
- AUD/USD: 0.6450 - 0.6650 ▼
- AUD/EUR: 0.5550 - 0.5750 ▼
- GBP/AUD: 2.0200 - 2.0400 ▲
- AUD/NZD: 1.1300 - 1.1500 ▲
- AUD/CAD: 0.9100 - 0.9300 ▼