AUD Strengthens Amid Robust Economic Data and Fed Rate Cut Expectations

The Australian Dollar (AUD) is pushing higher against the US Dollar (USD) as market participants reassess rate trajectories on both sides of the Pacific. Thursday’s session marks the fifth consecutive day of AUD appreciation, driven by a combination of stronger-than-expected Australian economic indicators and mounting speculation around Federal Reserve easing.

Economic Data Fuels AUD Recovery

Australia’s latest economic releases have shifted sentiment toward the currency. Private Capital Expenditure surged 6.4% quarter-over-quarter in Q3, substantially outpacing both the prior quarter’s 0.2% expansion and the 0.5% forecast. This acceleration suggests robust business investment momentum heading into year-end.

Adding to the AUD’s appeal, October’s monthly Consumer Price Index (CPI) reading came in at 3.8% year-over-year, exceeding both the consensus estimate of 3.6% and the previous month’s 3.5%. While inflation remains elevated relative to the Reserve Bank of Australia’s (RBA) 2–3% target, the persistent price pressures have cemented market expectations that the central bank will maintain its accommodative stance.

The RBA is widely anticipated to hold the Official Cash Rate (OCR) at 3.6% through December. Market pricing, as reflected in the ASX 30-Day Interbank Cash Rate Futures, suggests only a 6% probability of a 25-basis-point cut to 3.35% at the upcoming board meeting. The RBA’s recent policy minutes underscored a more balanced approach, signaling the bank’s willingness to hold steady if incoming data remains firm.

US Dollar Under Pressure Amid Fed Pivot Signals

The USD Index (DXY) is retreating around 99.50, pressured by a significant shift in Federal Reserve rate-cut expectations. Market pricing now reflects over 84% odds of a 25-basis-point rate cut in December—a dramatic reversal from the 30% probability seen just a week prior.

Recent labor market data has tilted the balance toward rate cuts. Initial Jobless Claims fell to 216,000 for the week ending November 22, beating the 225,000 expectation and signaling resilience. However, Fed Governor Christopher Waller has signaled that labor market weakness is his primary concern, stating inflation is “not a big problem” given recent employment softness. His remarks, combined with New York Fed President John Williams’s comments on near-term rate cut prospects, have reinforced market expectations for December action.

On the inflation front, the Producer Price Index (PPI) held steady at 2.7% year-over-year in September, meeting forecasts. Core PPI eased to 2.6% from prior readings of 2.9%, suggesting inflationary momentum is stabilizing. Retail Sales growth decelerated to 0.2% month-over-month in September from 0.6%, while Consumer Confidence slipped sharply—falling 6.8 points to 88.7 in November from 95.5 in October—indicating a cautious consumer backdrop that supports the Fed’s easing bias.

Australian Economic Activity Strengthens

Australia’s manufacturing and services sectors are showing resilience. The preliminary S&P Global Manufacturing Purchasing Managers Index (PMI) climbed to 51.6 in November from 49.7, signaling accelerating factory activity. Services PMI rose to 52.7 from 52.5, while the Composite PMI increased to 52.6 from 52.1, all reflecting steady economic expansion.

RBA Assistant Governor Sarah Hunter has cautioned that sustained above-trend growth could reignite inflationary pressures, but she also emphasized that the central bank will not overreact to single monthly inflation readings. Her remarks highlight the RBA’s cautious, data-dependent approach as it weighs competing growth and inflation dynamics.

Technical Setup Points to Further AUD Upside

The AUD/USD pair is currently trading near 0.6530, having broken decisively above the nine-day Exponential Moving Average (EMA). The daily chart reveals the pair occupying a rectangular consolidation zone, suggesting a neutral intermediate bias despite near-term bullish momentum.

The immediate resistance target lies near 0.6630, representing the upper boundary of the consolidation rectangle. On the downside, the psychological 0.6500 level—aligned with nine-day EMA support at 0.6495—marks a key pivot. A breakdown below this support zone could pave the way toward the rectangle’s lower boundary around 0.6420 and the five-month low of 0.6414 recorded in late August.

Currency Performance Summary

On Thursday, the Australian Dollar posted the strongest performance among major currency pairs, appreciating 0.13% against the US Dollar. The AUD also strengthened against the euro, British pound, Canadian dollar, and New Zealand dollar, reflecting broad-based confidence in the currency. Meanwhile, the USD weakened across the board, extending its recent downtrend as rate-cut expectations dominate market sentiment.