Aussie dollar edges higher as RBA’s hawkish tone offsets softening labour outlook
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Daily Currency Update
AUD/USD holds near US$0.6640 at time of writing supported by firm policy signals from the Reserve Bank of Australia (RBA) that continue to underpin the Australian Dollar. The pair trades about 0.20% higher on the day, extending Monday’s post-meeting strength and reflecting a market increasingly convinced that Australia’s monetary stance will remain tighter for longer relative to that of the United States. The latest boost for the currency came after RBA Governor Michele Bullock delivered remarks underscoring the central bank’s commitment to containing persistent inflationary pressures. Bullock noted that the Board sees no need for further rate cuts, a stance that stands in contrast to earlier market expectations of gradual easing through 2025. More strikingly, she revealed that policymakers had discussed scenarios in which a rate hike might be warranted, should inflation fail to retreat sustainably toward the 2%–3% target band. This tone marks a clear attempt by the RBA to anchor expectations and maintain a restrictive policy bias. With Australian inflation still running above target and wage dynamics showing resilience, the central bank has limited scope to ease aggressively. Instead, policymakers appear focused on preserving credibility and ensuring that recent progress on disinflation is not reversed. Markets have responded accordingly, pricing out earlier assumptions of mid-2025 rate cuts and shifting attention to the possibility of renewed tightening in 2026 if price pressures prove sticky. The divergence between the Australian and US policy outlooks has also provided support to AUD/USD. While the Federal Reserve continues to signal a cautious but ongoing path toward policy normalization, US inflation has softened more decisively than in Australia, allowing investors to contemplate additional rate reductions in the coming year. This relative monetary contrast—tighter prospects in Australia versus a more dovish tilt in the US—has kept the AUD on a broadly constructive trajectory. Attention now turns to key domestic data that could influence the RBA’s near-term stance. Australia’s November labour market report, due on Thursday, is projected to show a slowdown in employment growth to roughly 20,000 new jobs, down from the robust 42,200 gain recorded previously. The unemployment rate is expected to edge higher to 4.4%, reinforcing signs that labour market conditions are gradually cooling after several years of exceptional strength. While a softening labour market would normally increase the case for easing, the RBA has emphasized that inflation remains its overriding concern. As a result, Thursday’s figures will be scrutinized for any indication of wage-related pressure or structural tightness that could complicate the disinflation process. For now, resilient data and a firm policy tone leave the Australian Dollar well-supported, with AUD/USD likely to remain sensitive to both domestic labour trends and shifting expectations surrounding global monetary policy.Key Movers
The US Dollar stayed on the back foot Tuesday, even after a brief rebound on Monday, as traders turned their attention to the Federal Reserve’s upcoming policy announcement. With the US Dollar Index (DXY) still hovering near six-week lows, markets are clearly in “wait-and-see” mode, looking for clues on how quickly the Fed might begin cutting interest rates next year. Investors are particularly focused on three things at Wednesday’s meeting: the Fed’s updated dot plot, any changes in the economic outlook, and Chair Jerome Powell’s comments. While markets have been pricing in a series of rate cuts for 2025, Fed officials have recently sounded more cautious. That has created some tension between what investors hope to hear and what the central bank may actually signal. Fresh US labour data released Tuesday offered a mixed picture and didn’t do much to settle the debate. The latest numbers from ADP—tracking private-sector job growth—showed companies added an average of 4,750 jobs per week over the four weeks ending November 15. That’s not a weak number, but it does highlight a job market that is cooling gradually rather than expanding rapidly. The ADP data is known for its volatility, but the trend over recent months confirms a steady softening in hiring. At the same time, the JOLTS report for October showed job openings ticking up slightly to 7.67 million. This small rise was a surprise after several months of declines and hints that demand for workers hasn’t disappeared entirely. Still, the rest of the report—including hiring and quits—suggests the broader labour market continues to settle into a more balanced state after the exceptionally tight conditions of the last two years. These figures follow a run of data suggesting the US job market is past its peak and slowly losing momentum. Wage growth has eased, unemployment has edged higher, and payroll gains have become more moderate. For many investors, this reinforces the idea that the Fed will have room to cut interest rates in 2025. However, the central bank may not want financial conditions to loosen too quickly. If Powell strikes a firmer tone on Wednesday—reminding markets that inflation remains above target and that progress could be uneven—the Fed could push back gently against expectations for multiple cuts early next year. That would likely give the US Dollar some support. Until then, currency markets are drifting sideways as traders wait for clarity. The Fed’s communication is likely to set the tone for the dollar over the coming weeks and determine whether its recent softness marks a temporary pause or the start of a longer downward trend.Expected Ranges
- AUD/USD: 0.6550 - 0.6750 ▲
- AUD/EUR: 0.5600 - 0.5800 ▲
- GBP/AUD: 1.9950 - 2.0150 ▼
- AUD/NZD: 1.1400 - 1.1600 ▲
- AUD/CAD: 0.9100 - 0.9300 ▼