Aussie dollar holds firm as RBA rate cut bets cool
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Daily Currency Update
The Australian Dollar (AUD) is showing steady strength to close the week, with the AUD/USD pair trading above a key support level at 0.6450. During Friday’s European trading session, the Aussie climbed around 0.1%, hovering near 0.6490, as it continued to outperform most of its major peers. The currency’s resilience reflects growing investor confidence that the Reserve Bank of Australia (RBA) may not rush to cut interest rates this year. Market participants are beginning to scale back their expectations for near-term monetary easing, as inflation in Australia remains more persistent than previously thought. Despite maintaining a restrictive policy stance for much of 2024, the RBA is facing an economy where price pressures have proven surprisingly sticky. The latest inflation data added fuel to that view: the Australian Consumer Price Index (CPI) rose 1.3% in the third quarter on a quarterly basis, a notable acceleration from the 0.7% increase seen in the previous quarter. This stronger-than-expected reading has made traders rethink the likelihood of policy easing, at least in the short term. A firmer inflation outlook often lends support to a currency, as it reduces the probability of rate cuts that could weaken returns on local assets. For the AUD, this has provided a welcome boost after months of volatility and uncertainty. Meanwhile, external factors such as shifts in U.S. Treasury yields and the broader U.S. dollar trend continue to influence the pair’s direction. Looking ahead, traders will be watching next week’s economic calendar closely, particularly any fresh signals from the RBA or upcoming data on employment and retail sales. A continuation of strong domestic data could help the AUD extend its gains, while any signs of economic softness might revive rate-cut speculation. For now, though, the Australian dollar is holding its ground, supported by a combination of firm inflation, cautious optimism, and a central bank that seems in no hurry to loosen policy. As long as the pair remains above the 0.6450 level, market sentiment toward the Aussie is likely to stay constructive heading into the next trading week.Key Movers
The U.S. dollar came under pressure on Friday as a key gauge of American households’ economic outlook turned sharply negative. The US Dollar Index (DXY) slipped about 0.16 % to 99.53, tracking weaker sentiment and growing uncertainty over the U.S. outlook. At the heart of the moves: the University of Michigan’s consumer-sentiment index fell to 50.3 in November, down from 53.6 in October and below expectations around 53.2. That reading stands as the second lowest on record for the series, and just above the historic low seen in June 2022. Digging deeper into the components reveals what is driving the nervousness: the “current conditions” gauge plunged to 52.3, an all-time low for that part of the survey, while the “expectations” index retreated to 49.0, marking a multi-month low. Consumers cited growing concerns about their personal finances, declining business-outlook views and broad-based weakness across age, income and political groups. Meanwhile, short-term inflation expectations ticked up to 4.7 %, though the longer-term outlook eased to about 3.6 %. A souring consumer mood suggests households may pull back on spending, which in turn can translate into weaker growth and reduce the attractiveness of U.S.-dollar-denominated assets. In addition, lower confidence may increase the odds that the Federal Reserve considers policy easing in the future – a scenario that typically weighs on the currency. The sentiment index’s relatively strong correlation with the DXY – roughly 0.67 – underlines the link between domestic confidence and global currency flows. In short, while the dollar remains near the 100-mark, the deterioration in America’s consumer mood serves as a caution flag. Unless confidence stabilises or other data surprises to the upside, the greenback could face further headwinds as markets weigh the implications of a more cautious U.S. household psyche.Expected Ranges
- AUD/EUR: 0.5500 - 0.5700 ▼
- GBP/AUD: 2.0300 - 2.0500 ▲
- AUD/NZD: 1.1300 - 1.1500 ▲
- AUD/CAD: 0.8950 - 0.9150 ▼