The Australian Dollar has reached a near two-month high against the US Dollar as speculation mounts that the Reserve Bank of Australia may keep its policy restrictive. This sentiment is underpinned by stronger household spending and improved trade data, suggesting the RBA may maintain current rates next week.
Currently, the AUD/USD is trading around 0.6622, the strongest since 7 October. The market anticipates the RBA to maintain a wait-and-see approach in their December meeting. Recent domestic indicators do not justify further easing, with inflation remaining persistent and domestic demand showing resilience.
Household Spending And Trade Data
Household spending increased by 1.3% in October, a sharp rise from September’s 0.3%. The spending now marks a 5.6% rise from the previous year. Additionally, exports rose by 3.4% MoM in October, while the trade surplus widened to AUD 4,385 million from AUD 3,707 million.
China’s recent yuan midpoint adjustment offered further support to the Australian Dollar, given its role as a proxy for China’s economic outlook. The US Dollar, under pressure with expectations of a dovish Federal Reserve, also contributes to lifting AUD/USD. Meanwhile, the US Dollar Index is around 98.83, nearing a one-month low.
The Australian dollar is strengthening against the US dollar, hitting its highest point since October 2025 as our expectations shift. We are seeing a clear divergence in monetary policy between a potentially more aggressive Reserve Bank of Australia (RBA) and a softer US Federal Reserve. This setup suggests the Aussie’s upward trend has more room to run in the coming weeks.
This outlook is supported by Australia’s persistent inflation, which we saw in the latest quarterly CPI print for Q3 2025 coming in at 3.9%, still well above the RBA’s target band. Because of resilient data like this, money markets are now pricing in less than a 10% chance of an RBA rate cut in the first half of 2026. This hawkish stance is a strong tailwind for the currency.
Impact On US Economy
On the other side of the pair, the US economy is showing signs of cooling, which reinforces the case for a more dovish Federal Reserve. The November 2025 Non-Farm Payrolls report showed job growth slowing to a modest 155,000, while the Fed’s preferred inflation gauge, the core PCE index, eased to 2.8% year-over-year. These figures support the view that US rate cuts are on the table for mid-2026, weighing on the US dollar.
For derivative traders, this environment favors strategies that profit from a rising AUD/USD. We are seeing increased interest in buying call options with strike prices at 0.6700 and 0.6750, particularly with expirations in late January or February 2026. This allows traders to capture potential upside following the RBA’s meeting on December 9 while limiting downside risk.
Looking back, we remember the sharp AUD sell-off in mid-2024 when fears of a global slowdown took hold, pushing the pair below 0.6400. The current situation feels different because Australian domestic demand appears much more robust, providing a stronger floor for the currency. The main risk to this view would be an unexpected negative shock from China’s economy.
The growing interest rate differential between Australia and the US is also reviving the appeal of the carry trade. With the RBA holding rates steady and the Fed likely to ease, holding the higher-yielding Aussie against the US dollar becomes profitable. This fundamental support should help cushion any short-term dips in the AUD/USD exchange rate.
