AUD/USD is trading at about 0.6590, marking a 0.50% increase for the day. The pair benefits from the weakening US Dollar, influenced by potential changes at the Federal Reserve and signs of a slowing US economy.
Speculation On Federal Reserve Changes
Speculation around Kevin Hassett potentially succeeding Jerome Powell as Fed Chair pressures the US Dollar. Hassett’s preference for lower interest rates supports the idea of a dovish Fed, further affecting the currency’s performance.
Recent US data adds to the US Dollar’s negative trend. The ISM Services PMI indicates service activity growth but a slowdown in new orders and ongoing employment contraction. The S&P Global US Services PMI also suggests weakened activity, while the ADP Employment Change report shows a 32,000 job loss in November.
In Australia, the AUD remains stable despite lower-than-expected third-quarter GDP growth of 0.4% compared to the expected 0.7%. Encouraging remarks from the Reserve Bank of Australia support the currency, with Governor Michele Bullock suggesting future rate tightening if inflation remains high.
Attention shifts to Australia’s upcoming Trade Balance data and the US PCE report on Friday. These are pivotal before the Federal Reserve’s monetary policy meeting.
Market Predictions And Strategies
The market is now positioned for significant US Dollar weakness leading into next week’s Federal Reserve meeting. We see this driven by speculation of a more dovish Fed chair and recent poor data, like November’s ADP job losses. Consensus forecasts for Friday’s Non-Farm Payrolls report are for a gain of only 50,000 jobs, which would confirm a sharp slowdown from the 150,000 average we saw in the third quarter of 2025.
This makes buying put options on the US Dollar Index an attractive strategy to speculate on further declines. With Core PCE inflation, the Fed’s preferred gauge, having cooled to 2.8% in October, another soft reading on Friday would likely cement expectations for a rate cut. We are looking at options that expire in late December or January to capture the full effect of the Fed’s decision and any subsequent commentary.
On the other side of the pair, the Australian dollar is showing strength due to the Reserve Bank of Australia’s firm stance. Governor Bullock’s hawkish comments are backed by Australia’s latest quarterly CPI reading, which at 3.9% remains stubbornly above the central bank’s target. This policy divergence is a key reason for the Aussie’s resilience, even with the RBA holding its cash rate steady at 4.60% for the last two meetings.
For the AUD/USD pair itself, we see value in buying call options to gain upside exposure while limiting risk from the upcoming US data releases. This situation feels similar to the policy pivots we witnessed in the early 2020s, where clear central bank divergence created sustained currency trends. A strike price around 0.6650 could offer a good balance of risk and reward for traders positioning for a continued move higher in the coming weeks.
