The Australian Dollar to US Dollar exchange rate has risen to approximately 0.6560, marking a two-week high. This movement is attributed to a drop in the US Dollar due to increased expectations for interest rate cuts by the Federal Reserve following July’s US Consumer Price Index report.
The US Dollar Index, which measures the dollar’s value against six major currencies, has decreased to about 97.60. Notably, the New Zealand Dollar has shown the most strength against the US Dollar, which has depreciated by 0.61% against the Aussie Dollar.
Federal Reserve Rate Expectations
Expectations for a Federal Reserve rate cut in September have grown to 94%, rising from 86% on Monday, according to CME FedWatch. Meanwhile, the Australian employment data, expected on Thursday, suggests the economy will add 25,000 jobs in July, up from 2,000 in June, with the unemployment rate anticipated to drop to 4.2% from 4.3%.
The unemployment rate, published by the Australian Bureau of Statistics, is crucial as it reflects economic health and influences Reserve Bank of Australia’s decisions. A reduction in this rate generally benefits the Australian Dollar. The unemployment data release is scheduled for 14 August 2025.
The Australian Dollar has climbed to a two-week high against the US Dollar, sitting around 0.6560. This is happening because markets now strongly believe the US Federal Reserve will cut interest rates next month. Our attention is now shifting to the Australian employment numbers coming out tomorrow.
We see the US Dollar Index has slipped to 97.60, a level not consistently seen since early 2023, as the market digests the recent US inflation report for July which came in at 2.8%. This soft reading reinforces the idea that the Fed’s aggressive hiking cycle of 2022-2024 is now firmly in the past. This pivot is why expectations for a September rate cut have surged to 94%.
Australian Employment Report
Given this momentum, we are considering buying call options on the AUD/USD pair. These options would allow us to profit if the Australian Dollar continues to strengthen past its current level. This strategy is particularly timed for the Australian employment report expected tomorrow, which could push the exchange rate higher.
The market is betting on the Australian economy adding 25,000 jobs and the unemployment rate falling to 4.2%. If the actual figures are better than this, we could see a quick move towards the 0.6650 resistance level. However, a weaker-than-expected jobs number would likely reverse these recent gains, making our call options less valuable.
We remember how the Reserve Bank of Australia closely watched the tight labor market throughout 2023 and 2024 to guide its interest rate decisions. A strong jobs report tomorrow would signal continued economic health, making it less likely for the RBA to consider rate cuts soon. This divergence in policy, with the US looking to cut and Australia holding firm, is historically a strong driver for a higher AUD/USD.
