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Australia’s Economic Struggle Against Inflation
The Australian Dollar (AUD) has declined against the US Dollar (USD) following Australia’s 10-year bond yield rise to around 4.35% due to inflation concerns. The Reserve Bank of Australia (RBA) chose to keep the Official Cash Rate at 3.6%, with Governor Michele Bullock stating that rate cuts were not discussed, and core inflation above 3% is not desired. October’s TD-MI Inflation Gauge rose by 0.3% month-on-month, indicating a continuing inflation trend. Building Permits increased by 12.0% in October, outperforming expectations of 5.5% growth.
The US Dollar Index extended its rise, bolstered by caution over the Federal Reserve’s December policy. The US Fed lowered its benchmark rate by 25 basis points, now in a range of 3.75%–4.0%, though the decision saw dissent. The ongoing US government shutdown has contributed to market caution. Additionally, trade developments include the White House announcing adjustments in export controls and tariffs between the US and China.
Australia’s Quarterly Trimmed Mean CPI increased by 1.0%, exceeding expectations, while the AUD/USD pair is trading at approximately 0.6530. The price shows signs of weakening momentum, with crucial support levels at 0.6500 and resistance around 0.6600. Any shifts in China’s economic situation could impact the AUD, given the strong trade ties with Australia.
As of November 4, 2025, we are seeing the Australian Dollar weaken against the US Dollar due to persistent inflation concerns in Australia. The rise in the 10-year bond yield to 4.35% shows that investors demand higher returns to compensate for this risk. The Reserve Bank of Australia’s recent decision to hold rates at 3.6% while signaling no immediate cuts reinforces this pressure.
The domestic Australian economic picture appears mixed, creating uncertainty that weighs on the currency. While building permits showed surprising strength in September, the fourth consecutive monthly decline in ANZ Job Advertisements points to a cooling labor market. This comes as recent data from October confirmed that the TD-MI Inflation Gauge is still rising annually at 3.1%, putting the RBA in a difficult position.
Impact of US Economic Conditions
Looking at the US, the Dollar is gaining strength from a cautious Federal Reserve outlook. Although the Fed cut rates last week, the market is now pricing in only a 65% chance of another cut in December, down from 94% a week ago, according to the CME FedWatch tool. This hesitation, combined with a prolonged six-week US government shutdown, is pushing traders toward the relative safety of the Greenback.
We see confirmation of a slowing US economy, with the ISM Manufacturing PMI for October falling to 48.7, marking a contraction. Recent Non-Farm Payroll data released for October 2025 also came in below expectations at 150,000 jobs, adding to signs of a slowdown. This justifies the Fed’s cautious “wait-and-see” approach and fuels the market uncertainty that benefits the US Dollar.
The outlook for China, Australia’s largest trading partner, is also a significant concern and is directly impacting the Aussie dollar. The decline in China’s official Manufacturing PMI to 50.6 in October, alongside recent dips in iron ore prices to below $120 per tonne on demand fears, suggests weakening industrial activity. This external pressure further dampens the prospects for the resource-sensitive Australian Dollar.
From a technical standpoint, the AUD/USD pair is trading around 0.6530, below its nine-day moving average, which signals weakening momentum. The currency is stuck in a consolidation range, and a break below the psychological support at 0.6500 seems increasingly likely. We saw a similar period of consolidation back in the spring of 2024 before a sharp downward move.
For derivative traders, this environment suggests that buying AUD/USD put options could be a prudent strategy over the coming weeks. This approach allows us to capitalize on potential downside movement toward the 0.6460 support level while limiting risk to the premium paid. Volatility is likely to increase, especially with ongoing US government shutdown headlines and upcoming inflation data.
Alternatively, traders with a higher risk appetite might consider shorting AUD/USD futures contracts. A stop-loss order placed just above the nine-day EMA at 0.6540 could manage risk effectively. The key is to watch for a decisive break below the 0.6500 level, which could trigger further selling pressure.
