Australian dollar climbs as markets eye Fed and RBA signals
Written by
Daily Currency Update
The Australian dollar pushed higher on Wednesday, with AUDUSD trading firmly near US$0.6600—about half a percent stronger on the day. The pair has enjoyed steady support this week thanks largely to a softer US dollar. Traders continue to reposition as talk grows about a potential leadership change at the Federal Reserve, adding to the currency’s recent weakness. A run of US economic data has also pointed to losing momentum, reinforcing expectations that the Fed may adopt a more cautious tone in the months ahead. While the US dollar struggles, the Australian dollar has shown an impressive degree of resilience, even as Australia’s latest GDP figures came in slightly below expectations. Third-quarter Gross Domestic Product grew 0.4% compared with the 0.7% economists had forecast. On the surface, that’s a miss, but a closer look at the report offers some reassurance. Domestic demand held up reasonably well, and several supportive components—such as government spending and net exports—helped soften the disappointment. Comments from Reserve Bank of Australia Governor Michele Bullock helped bolster sentiment too. Speaking after the data, she stressed that the central bank remains prepared to tighten policy further if inflation does not ease as expected. She noted that the labour market is still “a little tight,” suggesting that wage pressures could keep an upward force on prices. Governor Bullock also indicated that Australia’s output gap is likely “closed,” meaning the economy is operating at or near full capacity. For currency traders, those remarks were enough to keep rate-hike expectations alive, lending the Aussie additional support. Attention in Australia now shifts to Thursday’s Trade Balance release. A strong reading could reinforce the view that the broader economy remains fundamentally sound, even if headline GDP growth has slowed. Australia’s trade surplus has been a key driver of AUD strength in recent years, and any surprise—positive or negative—could spark movement in the currency. Across the Pacific, US markets are gearing up for Friday’s Personal Consumption Expenditures (PCE) report, the Fed’s preferred inflation gauge. With the central bank preparing for its next policy decision, this data point is shaping up to be one of the most important of the week. If PCE inflation cools more than expected, it could deepen the pressure on the US dollar and give AUDUSD an additional lift. On the other hand, a hotter reading might breathe some life back into the greenback. For now, AUDUSD remains comfortably supported, trading with a firm tone as investors balance soft US data against Australia’s steady fundamentals and the RBA’s cautiously hawkish stance.Key Movers
The US dollar slipped further on Wednesday as markets continued to digest a fresh round of political and economic developments. The latest pressure came after President Donald Trump hinted during a Tuesday press conference that a “potential” Federal Reserve Chair was present, fanning speculation that White House economic adviser Kevin Hassett could replace Jerome Powell. Even without a formal announcement, the mere possibility of a leadership change at the Fed has unsettled markets, as investors try to assess how a new Chair might steer interest-rate policy heading into 2025. Currency traders tend to dislike uncertainty, and the suggestion of a shift at the top of the Fed—especially during a period of cooling economic momentum—added to the US dollar’s recent struggles. While Powell is widely viewed as a steady hand, Hassett’s potential appointment raises questions about the central bank’s future stance on inflation, employment, and interest-rate cuts. For now, markets appear to be pricing in a softer, more flexible Fed, contributing to the dollar’s downward drift. Economic data did little to provide relief. The ISM Services PMI showed that activity in the US services sector remained stable in November, rising slightly to 52.6 from 52.4 and beating expectations of 52.1. On the surface, an expansionary reading should support the dollar, but a closer look at the report revealed some worrying trends. New orders slowed, employment remained soft, and input prices continued to lean higher. That combination paints a picture of an economy that is still expanding, but under growing pressure—hardly the kind of backdrop that inspires confidence in the currency. Adding to the mixed signals, new labour market data released earlier in the day pointed to further weakness. According to the ADP National Employment Change report, private employers unexpectedly cut 32,000 jobs in November. Markets had been expecting a modest gain of 5,000 positions, making the surprise contraction all the more notable. For comparison, October saw an increase of 47,000 jobs. The sudden downturn suggests that businesses may be growing more cautious, potentially responding to softer demand and higher borrowing costs. While one month’s data does not make a trend, the combination of subdued employment, slowing orders, and rising input prices has heightened concerns about the resilience of the US economy. Investors will be watching closely to see whether these signs of cooling appear in other major indicators, including the upcoming Nonfarm Payrolls and inflation reports. For now, the US dollar remains on the defensive. With political noise surrounding the Fed and economic data offering more questions than answers, traders are leaning toward safer or better-positioned currencies. Unless clarity emerges on both fronts, the greenback may continue to face headwinds as the week progresses.Expected Ranges
- AUD/USD: 0.6500 - 0.6700 ▲
- AUD/EUR: 0.5550 - 0.5750 ▲
- GBP/AUD: 2.0150 - 2.0350 ▼
- AUD/NZD: 1.1300 - 1.1500 ▲
- AUD/CAD: 0.9100 - 0.9300 ▲