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Impact of Economic Data on AUD/USD
The Australian Dollar’s performance will depend on the upcoming Trade Balance data for September. Concurrently, the US Dollar remains firm, with reduced expectations for Federal Reserve rate cuts this year. The US Dollar Index reached a three-month high near 100.00, as the probability of a rate cut in December has lessened to 67.3% from 94.4%. The Reserve Bank of Australia’s interest rate decisions, influenced by economic outlook, can be bullish or bearish for the Australian Dollar.
Given the Reserve Bank of Australia’s decision to hold its interest rate at 3.6%, we see the AUD/USD pair facing significant pressure, falling to the 0.6500 level. This move reflects the market’s understanding that the RBA remains concerned about inflation, even as it pauses its hiking cycle. Traders should note this clear bearish signal for the Australian dollar in the short term.
The RBA’s stance is being reinforced by ongoing inflationary pressures, which we saw in the recent Q3 CPI data. Governor Bullock’s comments about needing “a little bit of tightness” suggest that any pivot towards rate cuts is still a distant prospect. In fact, the latest monthly inflation reading for October 2025 just came in at 0.6%, slightly above expectations and underscoring the stickiness of price pressures.
Furthermore, the Australian labor market remains robust, with the unemployment rate holding steady at 4.0% in the last report, defying forecasts for a slight increase. This economic resilience gives the RBA more justification to keep monetary policy restrictive to tame inflation. For traders, this means the fundamental case for a weaker Aussie dollar remains intact.
US Dollar Dynamics
On the other side of the pair, the US dollar is strengthening as expectations for a December rate cut from the Federal Reserve are diminishing. Recent US Core PCE inflation data, the Fed’s preferred gauge, came in slightly hotter than anticipated at 0.3% for the month of October 2025. This has pushed the probability of a year-end Fed rate cut down significantly, supporting the greenback.
Looking back, this situation presents a clear policy divergence, unlike what we saw during the coordinated global rate hikes of 2023 and 2024. While the Fed is still considering its next move, the RBA appears firmly on hold with a hawkish bias. This divergence is the primary driver weighing on the AUD/USD exchange rate.
