Aussie Dollar Powers Higher as Fed Dovish Bets Weigh on Greenback

The Australian Dollar surged to a five-day high on Thursday, capitalizing on a weakening US Dollar amid growing expectations that the Federal Reserve will cut rates next month. Market sentiment shifted dramatically as traders reassess the interest rate divergence between Australia and the United States.

What’s Driving the AUD Strength?

The Reserve Bank of Australia’s cautious stance on rate cuts combined with resilient domestic economic data painted a bullish picture for the Aussie. The latest Private Capital Expenditure figures came in hotter than expected, rising 6.4% quarter-over-quarter in Q3 compared to just 0.2% growth in the previous quarter and beating the 0.5% forecast. This surprise strengthened the case for the RBA to maintain its Official Cash Rate at 3.6%, defying global rate-cutting trends.

Adding to the supportive backdrop, Australia’s first monthly Consumer Price Index reading in October climbed 3.8% year-over-year, exceeding both the market consensus of 3.6% and the prior month’s 3.5% reading. While still elevated, this data reinforced that inflation remains the RBA’s primary concern, supporting the case for policy steadiness in the near term.

The ASX 30-Day Interbank Cash Rate Futures painted a dovish picture for the RBA, with December 2025 contracts trading at 96.41 as of November 26—implying just a 6% probability of a rate cut to 3.35% in the upcoming meeting. This narrow window for easing underpinned the Aussie’s outperformance.

US Dollar Crumbles as Fed Pivot Accelerates

Meanwhile, the Greenback extended a three-week losing streak, dragged down by reinforced bets on Federal Reserve policy accommodation. The CME FedWatch Tool now prices in an 84% likelihood of a 25 basis point rate cut at the December FOMC meeting, up sharply from just 30% probability one week earlier—a dramatic shift signaling traders’ conviction in imminent easing.

The catalyst? Fresh commentary from Fed policymakers highlighted evolving priorities. Fed Governor Christopher Waller emphasized on Monday that labor market weakness poses the greater risk, dismissing inflation as “not a big problem” given recent softness in employment. New York Fed President John Williams echoed similar sentiments on Friday, signaling openness to “near-term” cuts. Fed Governor Stephen Miran went further, stating he would “vote for a 25-bps cut” if his vote were decisive, pointing to disappointing nonfarm payrolls data as justification.

Labor market indicators indeed softened, with Initial Jobless Claims falling to 216,000 for the week ending November 22—beating expectations of 225,000 but reinforcing the trend of gradual deterioration. The four-week moving average eased to 223,750, suggesting underlying weakness despite the headline beat.

Consumer confidence cracked as well, with the Conference Board reporting household sentiment sliding 6.8 points to 88.7 in November from 95.5 in October. Retail Sales growth decelerated to a meager 0.2% month-over-month in September versus August’s 0.6%, signaling more cautious consumer behavior as holiday shopping season approaches.

The US Dollar Index (DXY), tracking the Greenback against six major currencies, weakened below 99.50, extending losses as dovish Fed bets intensified.

AUD/USD Eyes the 0.6630 Level

From a technical perspective, the AUD/USD pair traded near 0.6530 on Thursday, having broken above the nine-day Exponential Moving Average (EMA) at 0.6495. The pair is consolidating within a rectangular trading zone, signaling traders are digesting the sharp move higher.

The immediate resistance lies at the upper boundary of the consolidation zone near 0.6630. A sustained break above this barrier could open the door toward 0.6700, attracting fresh momentum. Conversely, a pullback would target the nine-day EMA at 0.6495 and the psychological 0.6500 level as immediate support. Deeper weakness could see the pair test the lower boundary of the consolidation around 0.6420, followed by the five-month low of 0.6414 recorded on August 21.

Market Breadth and Cross-Currency Momentum

The Australian Dollar outperformed against virtually all major currencies on Thursday. Against the US Dollar, the Aussie gained 0.33%, marking its strongest performance of the day. The AUD also edged higher against the Euro (0.02%), sterling (0.00%), and yen (0.06%), though it softened marginally against the New Zealand Dollar (down 0.20%) and Swiss Franc (down 0.01%).

Manufacturing activity painted a mixed picture. Australia’s S&P Global Manufacturing PMI rose to 51.6 in November from 49.7 previously, signaling a return to expansion. Services PMI held resilient at 52.7, slightly above October’s 52.5, while the Composite PMI nudged higher to 52.6 from 52.1—all consistent with moderate economic momentum.

Bitcoin Price in AUD: A Parallel Play?

While traditional forex markets react to monetary policy shifts, cryptocurrency traders have begun tracking Bitcoin price in AUD as an alternative inflation hedge and proxy for AUD strength. As the Australian Dollar appreciates, Bitcoin priced in AUD may offer exposure to both digital asset volatility and currency appreciation—though this relationship remains speculative and far from established.

Looking Ahead: What’s Next for the Aussie?

The RBA’s November monetary policy meeting minutes reinforced a balanced stance, with board members signaling an extended hold on rates if incoming data proves stronger than expected. RBA Assistant Governor Sarah Hunter cautioned that sustained above-trend growth could reignite inflation, though she emphasized the central bank won’t overreact to a single month of volatile data.

The next major catalysts for AUD/USD movement will be December’s Fed decision and January’s RBA meeting. Traders should monitor US labor data, inflation prints, and Fed commentary for clues on the timing and magnitude of rate cuts. Any surprise weakness in Australian economic data or faster-than-expected US disinflation could trigger a rapid reversal of the Aussie’s recent gains.

For now, the interest rate differential favors the Australian Dollar, but the window may be closing as global monetary policy shifts toward accommodation. Tactical traders should watch the 0.6630 resistance level closely—a breakdown could signal the next leg of AUD/USD strength, while a failure to break higher may suggest consolidation before the next directional move.