The Australian dollar maintains its upward momentum after CPI data exceeds expectations, and the Fed's rate cut expectations intensify

CPI Release Boosts Australian Dollar Strength, RBA Policy Stance Becomes More Cautious

Following the Australian Bureau of Statistics (ABS) release of the “full” monthly Consumer Price Index, the Australian dollar (AUD) against the US dollar (USD) extended its gains for the fourth consecutive trading day. Data showed that October CPI rose 3.8% year-on-year, surpassing market expectations of 3.6% and the previous month’s 3.5%. This unexpectedly high inflation data has prompted the market to reassess the Reserve Bank of Australia’s (RBA) policy outlook.

Despite the strong CPI figures, the AUD remained relatively stable during Wednesday’s trading, with a midweek price around 0.6480. Market participants believe this data may reinforce the RBA’s stance to keep interest rates unchanged for an extended period. The RBA is expected to maintain the official cash rate (OCR) at 3.6% in its December decision, as inflation remains above its 2-3% target range.

Australia’s labor market remains resilient. RBA officials noted that although the unemployment rate has slightly increased, the overall employment market remains robust and is expected to stay that way. The preliminary manufacturing PMI for November stood at 51.6, up from 49.7 in the previous month, while the services PMI rose from 52.5 to 52.7, and the composite PMI increased from 52.1 to 52.6, all indicating moderate economic growth.

Fed Rate Cut Expectations Rise, US Dollar Under Pressure

Recent US economic data have been weaker than expected, boosting market expectations for a Fed rate cut in December. According to CME FedWatch, the market now prices in an over 84% probability that the Federal Reserve will cut the benchmark federal funds rate by 25 basis points (bps) at the December meeting, up from just 50% a week ago.

The US September Producer Price Index (PPI) was unchanged at 2.7% YoY, in line with expectations and the previous month, but core PPI fell from 2.9% to 2.6%, outperforming the expected 2.7%. In contrast, US retail sales increased by only 0.2% month-over-month, below August’s 0.6% gain, reflecting growing consumer caution. Consumer confidence also deteriorated sharply, with November’s confidence index dropping 6.8 points from October to a low of 88.7.

Recent statements from Federal Reserve officials further support rate cut expectations. Fed Governor Christopher Waller said Monday that he is mainly concerned about the labor market and believes that with soft employment data, inflation “is not the primary concern right now.” He warned that September non-farm payrolls might be revised downward and that the phenomenon of concentrated hiring “is not a good sign.” New York Fed President John Williams on Friday indicated that policymakers could act to cut rates “in the near term.” Fed Board Governor Stephen M. Miller explicitly stated that the non-farm payroll data is sufficient to support a rate cut in December, and if his vote were decisive, he “would vote to lower by 25 basis points.”

Influenced by these factors, the US Dollar Index (DXY) fell slightly in the previous session and is currently trading around 99.80, continuing to face downward pressure. ASX 30-day interbank cash rate futures as of November 25 show the December 2025 contract trading at 96.41, implying only a 6% chance of a rate cut to 3.35% at the upcoming RBA board meeting (from the current 3.60%).

Technical Analysis: AUD/USD Faces Key Resistance, Breakout Could Reach 0.6500

From a technical perspective, the AUD/USD currency pair is trading within a rectangular consolidation zone. In the short term, the pair remains below the 9-day exponential moving average (EMA) at 0.6479, indicating limited recent momentum.

Support is found at the lower boundary of the rectangle near 0.6420, with further downside protection at the five-month low of 0.6414, established on August 21.

On the upside, a break above the 9-day EMA at 0.6479 could open new upward potential. If the pair successfully breaches this key level, it may test the psychological level at 0.6500. Further extension of the rally could see the pair approaching the upper boundary of the rectangle near 0.6630, which would be a significant resistance in the long-term technical pattern.

Overview of Major Currency Performance Against the AUD

In cross-currency performance today, the Australian dollar showed divergence against major currencies. The strongest performance was against the Japanese yen (JPY), while gains against the Swiss franc (CHF) were more modest. This reflects ongoing investor demand for the AUD as a high-yield currency amid current global risk appetite conditions.

Overall, the AUD/USD trend will continue to be influenced by divergence in central bank policies and the pace of economic data releases. As PPI data approaches, further US inflation data will have a profound impact on the medium-term direction of this currency pair.