AUD Strengthens on Inflation Signal While RBA Signals Patient Stance Ahead of December Decision

Market Momentum Favors the Australian Dollar

The Australian Dollar is on a winning streak, notching up its fifth consecutive session of gains against the US Dollar. The AUD/USD pair is currently trading near 0.6530, buoyed by a combination of stronger-than-expected economic data from Australia and weakness in the Greenback as traders reassess Federal Reserve rate-cut expectations.

Australia’s Economic Data Supports AUD Rally

Data released this week has painted a resilient picture of the Australian economy. Private Capital Expenditure surprised to the upside, climbing 6.4% quarter-over-quarter in Q3—a significant jump from the prior quarter’s modest 0.2% gain and well ahead of the 0.5% consensus forecast. More notably, Australia’s first monthly Consumer Price Index reading came in at 3.8% year-over-year for October, exceeding both the market consensus of 3.6% and the previous print of 3.5%.

The stronger-than-anticipated inflation figure has reinforced market conviction that the Reserve Bank of Australia will maintain its cautious stance. While inflation remains stubbornly above the RBA’s 2-3% target band, the central bank has signaled it’s in no rush to cut rates. Market pricing via ASX 30-Day Interbank Cash Rate Futures suggests only a 6% probability of an RBA rate cut to 3.35% at its December meeting, with the official cash rate expected to remain anchored at 3.60%.

Fed Pivot Weakens the US Dollar

The weakness in the Greenback reflects a dramatic shift in rate-cut expectations. The CME FedWatch Tool now suggests markets are pricing in better than 84% odds of a 25-basis-point Fed rate cut in December, a stark contrast to the mere 30% probability just one week prior. This pivot has been fueled by mixed US economic signals and remarks from Fed officials signaling openness to near-term easing.

Initial Jobless Claims fell to 216,000 for the week ending November 22, undershooting the 225,000 forecast. Meanwhile, US Producer Price Index inflation has stabilized at 2.7% year-over-year, with Core PPI moderating to 2.6% from 2.9%. Fed Governor Christopher Waller noted that the weakening labor market—not inflation—is his primary concern, signaling support for a December cut.

Technical Picture Turns Constructive

On the charts, AUD/USD has broken above its nine-day Exponential Moving Average and is eyeing the upper boundary of a rectangular consolidation zone near 0.6630. Immediate support sits at the psychological 0.6500 level, which aligns with the nine-day EMA, while a deeper break could expose the rectangle’s lower boundary at 0.6420 and the five-month low of 0.6414 from August 21.

Looking Ahead: Where Does AUD Stand?

As traders position for central bank decisions in both December, the divergence in monetary policy paths—with the RBA holding steady while the Fed cuts—is likely to remain a key driver of AUD/USD direction. For investors tracking cryptocurrency valuations in AUD terms (such as bitcoin to AUD conversions), the strengthening Australian Dollar also makes local digital asset prices more accessible relative to USD-denominated benchmarks. The next critical test for the pair lies at 0.6630, with conviction only returning on a break above this level.