Australian Dollar Outlook: Analysts Sees Aussie CPI Opening the Door to Further Gains
Westpac forecasts scope for Australian Dollar gains against the US Dollar if inflation strengthens the case for a November RBA hike, now expected by Goldman.
The Australian Dollar to US Dollar exchange rate eased back towards US$0.70 on Friday, leaving next week’s inflation figures to test whether its recent recovery can extend.
The RBA’s daily exchange-rate series put AUD/USD at 0.7006 on Friday, against 0.7018 on Thursday.
Westpac sees room for further gains if the inflation figures strengthen expectations of another rate rise, while Goldman Sachs has already changed its November call from a hold to a quarter-point increase.
The 28 October CPI release will show whether the evidence warrants that shift before the RBA’s 3 November decision.
Goldman changes its call, but CPI can still change the outcome
The revision follows Deputy Governor Andrew Hauser’s warning that inflation pressures have worsened despite the tightening delivered this year.
The immediate currency response featured in Wednesday’s coverage of the Australian Dollar’s rise above US$0.70, when Barclays also maintained a positive view.
Economists Andrew Boak and Will Maher write: “We now expect the RBA to hike by 25bp to 4.85% at its November meeting (previously on hold at 4.60%).”
“Today’s remarks suggest the RBA continues to see risks to inflation and inflation expectations as tilted to the upside even with the delivered 100bp tightening year-to-date and in our view – absent a downside surprise in the 3Q2026 CPI report (due 28 Oct) – make a further hike in November more likely than not.”
“Beyond this, our base case is that the RBA holds the policy rate at 4.85% until a gradual easing cycle begins in 2H2027.”
That distinction limits how far the revised forecast alone can support the currency: an earlier rise improves the near-term interest-rate outlook, but Goldman is not predicting repeated tightening beyond November.
Westpac sees room for more rate repricing
Westpac economist Ryan Wells links the Australian Dollar‘s prospects to the gap between a possible rate increase and how much investors have already anticipated.
Assessing Wednesday’s market reaction, he writes:
“The Aussie dollar meanwhile found a much firmer bid following yesterday’s hawkish commentary from RBA Deputy Governor Hauser, up 0.4% to around the USD0.7030 mark, back to late-September levels.”
“But with November still only about 50% priced in, there is scope for a further rally in the AUD in the period ahead, should the Q3 CPI print on the higher side and RBA commentary remain hawkish.”
That pricing describes Westpac’s assessment after the speech, rather than a live probability for Friday.
Higher inflation could encourage investors to price a November increase more fully, lifting expected returns on Australian assets and demand for the currency.
A result that merely confirms what markets already expect would provide less reason for another rally.
The ABS release on Wednesday completes the September-quarter inflation picture, making the underlying components especially important after Hauser’s comments about pressure on productive capacity.
Goldman identifies the pressures behind its revised call:
“First, Mr Hauser reiterated upside risks to inflation from higher oil prices, AI demand feeding through to inflation, and less capacity in the economy than previously assessed.”
“Second, Mr Hauser noted components of the CPI that are “rising the most are actually the ones most directly linked to capacity pressures,” and “the staff were looking at whether we needed to change our judgment on capacity pressures in the labour market again.””
A softer labour market therefore does not automatically settle the rate decision in favour of a pause.
Westpac also recorded a supportive international backdrop, with improving risk appetite and rising equities accompanying the Australian Dollar’s advance.
Domestic interest-rate support could prove less effective if renewed global selling undermines demand for currencies sensitive to growth.
What This Means for AUD/USD
The next opportunity for further Australian Dollar gains is an inflation result that reinforces the case for November tightening. Westpac’s argument depends on investors still having scope to raise their expectations, alongside continued hawkish RBA communication.
A downside surprise would challenge Goldman’s revised call and leave part of the speech-driven rally exposed. The composition of inflation matters because persistent services pressure would give policymakers less comfort than a rise concentrated in fuel.
Even if the RBA hikes, attention will turn to whether it signals more increases or a lengthy pause. Goldman’s forecast allows interest rates to remain high for months without rising further, so sustained AUD/USD gains would need support beyond simply delivering the November move.
