The Australian Dollar (AUD) advances against the US Dollar (USD) on Friday, extending gains for the second successive day. The AUD/USD pair receives support as the US Dollar (USD) could lose ground amid rising expectations of US Federal Reserve (Fed) rate cuts following the unexpectedly cooled US Consumer Price Index (CPI) inflation in November.
The AUD could receive support from investors’ caution following the release of Australia’s Consumer Inflation Expectations, which rose to 4.7% in December from November’s three-month low of 4.5%, supporting the Reserve Bank of Australia’s (RBA) hawkish stance.
Australia’s Private Sector Credit rose 0.6% month-over-month (MoM) in November, beating expectations of 0.2% but slowing from October’s 0.7% increase. On an annual basis, credit growth edged up to 7.4% YoY from 7.3%, marking the fastest pace since January 2023.
US Dollar loses ground amid easing inflation
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is holding steady and trading around 98.40 at the time of writing. Traders await the release of the University of Michigan Consumer Sentiment Index for December, which is due later on Friday.
- The US Bureau of Labor Statistics (BLS) released on Thursday that the US Consumer Price Index (CPI) eased to 2.7% in November. This reading came in below the market consensus of 3.1%. Meanwhile, the US core CPI, which excludes volatile food and energy prices, rose by 2.6%, missing the expectation of 3.0%. This figure marks the slowest pace since 2021.
- US President Donald Trump said on Thursday that the next chairman of the Federal Reserve (Fed) will be someone who believes in lower interest rates “by a lot.” Trump further noted that he will soon announce a successor to current Fed Chair Jerome Powell.
- Federal Reserve (Fed) Governor Christopher Waller, who is under consideration to become chair of the central bank, reiterated his dovish stance on interest rates during a CNBC forum. “Because inflation is still elevated, we can take our time – there’s no rush to get down. We can steadily bring the policy rate down toward neutral,” Waller said.
- The CME FedWatch tool shows a 72.3% probability of rates being held at the Fed’s January meeting, down from 75.6% a day earlier. Meanwhile, the likelihood of a 25-basis-point rate cut has risen to 27.7% from 24.4%.
- The US November jobs report showed payroll growth of 64K, slightly above forecasts, but October figures were revised sharply lower, and the unemployment rate rose to 4.6%, the highest since 2021, underscoring a gradually cooling labor market. Retail sales were flat on the month, reinforcing signs that consumer demand is losing momentum.
- Fed officials are split over whether more easing of monetary policy is needed next year. The median Fed official penciled in just one reduction in 2026, but some policymakers see no further cuts. Meanwhile, traders anticipate two rate cuts next year.
- Traders expect the RBA to deliver a rate hike as early as February. Commonwealth Bank of Australia and National Australia Bank now expect the RBA to start tightening sooner than previously projected, pointing to stubborn inflation in a capacity-constrained economy. Their forecasts followed the central bank’s hawkish hold on rates at its final 2025 meeting last week. Swaps price in a 28% chance of a February hike, nearly 41% in March, with August almost fully priced.
- Australia’s preliminary S&P Global Manufacturing PMI edged up to 52.2 in December from 51.6 previously, according to data released by S&P Global on Tuesday. Meanwhile, the Services PMI slipped to 51.0 from 52.8, and the Composite PMI fell to 51.1 from 52.6.
- The Australian Bureau of Statistics (ABS) reported last week that the Unemployment Rate steadied at 4.3% in November. The figure came in below the market consensus of 4.4%. Furthermore, the Australian Employment Change arrived at -21.3K in November from 41.1K in October (revised from 42.2K), compared with the consensus forecast of 20K.
Australian Dollar remains within a confluence support zone around 0.6600
The AUD/USD pair is trading below 0.6620 on Friday. The technical analysis of the daily chart shows the pair is positioned below the ascending channel trend, reflecting a weakening of a bullish bias. The nine-day Exponential Moving Average (EMA) trends higher, sitting just above the spot and capping attempts to extend. The short-term average has risen persistently over the past fortnight, indicating an improving upside bias.
The 14-day Relative Strength Index (RSI) at 56.76 (neutral-bullish) confirms building momentum. The pair maintains a modest uptrend as the nine-day EMA slope remains positive while price consolidates just below the average. RSI has cooled from overbought readings seen earlier this month, yet holds above the midline, keeping bulls in control.
The AUD/USD pair tests the nine-day EMA at 0.6621. A rebound toward the ascending channel would revive the bullish bias and support the pair to test the three-month high of 0.6685, followed by 0.6707, the highest since October 2024. On the downside, the AUD/USD pair could fall toward the psychological level of 0.6500, followed by the six-month low of 0.6414, recorded on August 21.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | -0.02% | 0.08% | 0.00% | 0.00% | 0.03% | 0.09% | |
| EUR | 0.01% | -0.01% | 0.11% | 0.02% | 0.03% | 0.05% | 0.10% | |
| GBP | 0.02% | 0.00% | 0.13% | 0.03% | 0.03% | 0.05% | 0.11% | |
| JPY | -0.08% | -0.11% | -0.13% | -0.07% | -0.07% | -0.06% | -0.00% | |
| CAD | -0.01% | -0.02% | -0.03% | 0.07% | -0.01% | 0.00% | 0.08% | |
| AUD | -0.01% | -0.03% | -0.03% | 0.07% | 0.00% | 0.02% | 0.07% | |
| NZD | -0.03% | -0.05% | -0.05% | 0.06% | -0.01% | -0.02% | 0.06% | |
| CHF | -0.09% | -0.10% | -0.11% | 0.00% | -0.08% | -0.07% | -0.06% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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