AUD/USD slips despite RBA holding rates steady
AUD/USD closed lower last week at 0.6493 (-0.40%), ending a three-week winning streak, despite Reserve Bank of Australia (RBA) holding its cash rate at 3.60%.
RBA’s ‘on hold’ decision came after September quarter inflation surprised to the upside, with trimmed mean inflation at 3.0% – the top of RBA’s 2 – 3% target band, and well above forecasts. While unemployment rate rose more than expected in September (4.5% from 4.3% prior), RBA noted that its other labour market indicators continued to signal underlying tightness.
While a hawkish on hold decision would typically boost AUD/USD, its fall last week was the result of a sharp deterioration in global risk sentiment, with high-beta Nasdaq 100 plunging 3.09% – its worst week since April – dragging risk-sensitive currencies lower.
US government reopening and China optimism strengthen outlook
AUD/USD has kicked off the new week on a stronger footing, currently trading 25 pips (0.40%) higher at 0.6520, buoyed by cautious comments on inflation and growth from RBA Deputy Governor Andrew Hauser this morning, plus positive developments in both US and China.
In US, imminent reopening of government after a 40-day shutdown is a welcome boost, restoring pay to 800,000 federal workers and restarting vital programs that will lift consumer confidence, activity and spending. This should also help improve risk sentiment across markets, including for risk currencies such as AUD/USD.
Meanwhile in China, optimism is building on two fronts: US investment bank Goldman Sachs recently raised its China gross domestic product (GDP) growth projections to 4.8% for 2026 (from 4.3% previously), and to 4.7% for 2025 (up from 4.0% previously).
October consumer price index (CPI) data released over the weekend exceeded expectations, signalling a tentative stabilisation in consumer prices after months of deflationary pressures. Core CPI (excluding food and energy) hit 1.2% year-on-year (YoY) – the highest in 20 months – up from 1.0% in September.
Looking ahead, key local driver for AUD/USD this week will be Thursday’s Australian labour force report.
Employment
Date: Thursday, 13 November at 11.30am AEDT
For September, employment in Australia rose by 14,900 jobs, falling short of the 20,000 gain market expected. Unemployment rate surged to 4.5% from 4.3%, as participation rate increased from 66.9% to 67%.
This marked the highest jobless rate since November 2021, reinforcing evidence of a softening labour market – a trend we expect to persist into 2026, and one we think will compel further RBA easing.
October preview: Consensus expects a rise of 20,000 jobs, and for unemployment rate to ease to 4.4%. In-line data should keep RBA on hold, but a 4.5% or 4.6% print would sharply raise odds of a 25 basis point (bp) cut in coming months.
Australian interest rate market is currently pricing in 3.5 bp of easing for RBA’s December meeting, and about 18 bp of cuts by June 2026.
