AUD/USD posts fourth weekly gain as key factors ease rate cut expectations
AUD/USD closed higher last week at 0.6535 (+0.65%), marking a fourth weekly gain in the past five weeks. Last week’s strength was supported by several tailwinds, including three key factors that reduced expectations of additional Reserve Bank of Australia (RBA) rate cuts.
Firstly, a robust October labour force report showed employment rising by 42,200 during the month, representing the first upside surprise in employment growth since April 2025. The participation rate remained steady at 67.0% and the unemployment rate retraced to 4.3% from 4.5% previously.
Secondly, comments from Deputy Governor Hauser provided further evidence of the RBA’s recent tone becoming less dovish. The Deputy Governor noted that financial conditions have ‘clearly eased’ and that, although the RBA’s forecasts are based on a technical assumption of one more rate cut, one could ‘draw their own conclusions’ from the fact that these forecasts resulted in a slight inflation overshoot.
Thirdly, the Westpac Consumer Sentiment index surged by an impressive 12.8% month-on-month (MoM) in November to 103.8, its highest level since December 2021.
China growth outlook upgraded
Influential US investment bank Goldman Sachs recently made one of the biggest upgrades to China’s gross domestic product (GDP) growth forecasts in the past decade, primarily driven by:
- Strong export growth,
- Projected market-share gains at the expense of other countries
- China’s increased bargaining power around rare earths.
AUD/USD slips: Fed outlook and local drivers in focus
AUD/USD has started the new week on the back foot, falling 20 pips (0.33%) to 0.6515 amid cautious trading ahead of the resumption of US economic data, after the longest shutdown in history concluded last week.
These data points are expected to provide further insights into whether the Federal Reserve (Fed) will cut rates in December, although the prospects of this are now reduced following hawkish remarks from several Fed speakers last week.
Locally, the key drivers for AUD/USD this week will be Tuesday’s release of the RBA meeting minutes and Wednesday’s third quarter (Q3) wages data, which is expected to rise by 0.8% quarter-on-quarter (QoQ) and 3.4% year-on-year (YoY).
The Australian interest rate market starts the week pricing in 2 basis points (bp) of easing for the RBA’s December meeting and about 10 bp of cuts by June 2026.
Annual wage price index chart
