Insights 
VT 
The Australian Dollar (AUD) is holding gains against the US Dollar (USD) due to a weaker Greenback, impacted by the ongoing US government shutdown and softer PMI data. At the moment, the AUD/USD pair is near 0.6600, marking its first potential weekly rise in three weeks, while the US Dollar Index is close to 97.72.
The Institute for Supply Management reported a decrease in the Services PMI to 50 in September from 52 in August. Meanwhile, S&P Global data indicated a slowdown in the services sector, with the US Services PMI decreasing to 54.2 from 54.5 and Australia’s declining to 52.4 from 55.8.
The Impact of Soft Services Data
The soft services data suggests the Federal Reserve might continue with monetary easing, with a 25 basis-point interest cut expected soon and an 85% chance of another in December. The Reserve Bank of Australia, which maintained its cash rate at 3.60%, has signaled a cautious approach, emphasising data dependency for future decisions.
Interest-rate swaps suggest a 36% chance of a 25-bps cut in November, down from 55%, and about a 50% chance in December. Quantitative easing and tightening by the Reserve Bank of Australia can also influence the AUD, with easing potentially weakening the currency and tightening likely strengthening it.
As of today, October 4th, 2025, we are seeing the AUD/USD pair holding strong around the 0.6600 mark. This is mainly because the US dollar is weakening due to the ongoing US government shutdown and recent poor economic numbers. The pair is on track to post its first weekly gain in three weeks, signaling a potential shift in momentum.
The recent US ISM Services PMI data, which fell to 50, is a major concern as this level indicates the service sector has stopped growing. This reinforces our view that the Federal Reserve will be forced to ease its monetary policy and cut interest rates later this month. Markets are now pricing in an almost certain 0.25% rate cut in October and a high chance of another in December.
Potential Opportunities for Traders
Looking back at the 2018-2019 shutdown, which lasted 35 days, we see that prolonged political uncertainty can significantly drag on the US dollar. The current economic slowdown is also sharp, as the S&P Global Services PMI has now fallen for two consecutive months. This pattern of weakening data gives us more confidence that the Fed will act soon.
In contrast, the Reserve Bank of Australia is taking a more measured approach, holding its cash rate steady at 3.60%. The RBA has made it clear that future rate changes depend heavily on upcoming inflation and wage figures. This suggests a much slower path to rate cuts compared to what we expect from the US.
For derivative traders, this growing difference between the Fed’s and RBA’s policies suggests an opportunity. This outlook supports strategies that benefit from a rising AUD/USD, such as buying call options on the Australian dollar or using futures to go long on the pair. These positions would profit if the US dollar continues to weaken more than the Aussie dollar, as expected.
However, we must also watch Australia’s own economic signals, as its services PMI also showed a slowdown. Upcoming Australian inflation data will be critical; with inflation still running above the RBA’s 2-3% target band in recent quarters, any surprise fall could quickly change their cautious stance. A weak inflation print could increase the chances of an RBA rate cut, which would challenge the bullish view on AUD/USD.
