The AUD/USD pair gave up its early session gains on Thursday, trading flat near 0.6590 in the European session. The pair faced pressure as the US Dollar (USD) rebounded from intraday losses, with the US Dollar Index (DXY) climbing back toward Wednesday’s two-month high around 99.00.
US Dollar Rebounds as Fed Outlook Remains in Spotlight
The Greenback initially weakened after the release of the FOMC minutes from the September meeting, which confirmed that Federal Reserve officials view further rate cuts as likely in the months ahead. The Fed’s dot plot signaled expectations for the Federal Funds Rate to fall to 3.6% by year-end, implying two additional rate cuts before 2026.
All eyes are now on Fed Chair Jerome Powell’s speech, scheduled for 12:30 GMT, which could provide key insights into:
- The Fed’s response to the ongoing US government shutdown
- The outlook for labor market normalization
- The broader direction of monetary policy
In the meantime, markets are also awaiting Friday’s release of the Michigan Consumer Sentiment Index and inflation expectations for October.
Aussie Dollar Holds Ground on Sticky Inflation Expectations
Despite AUD/USD pulling back, the Australian Dollar remains relatively stable against its peers, supported by signs that inflation in Australia remains persistent—a factor that may lead the Reserve Bank of Australia (RBA) to maintain a cautious approach on rate cuts.
Earlier on Thursday, data from the University of Melbourne showed that 12-month forward Consumer Inflation Expectations ticked higher to 4.8% in October, up from 4.7% in September. This reinforces the view that inflationary pressures are still sticky and may keep the RBA on the sidelines for now.
Key Takeaways
- AUD/USD trades flat near 0.6590, giving up earlier gains.
- USD recovers after a brief correction, with focus on Fed Chair Powell’s speech.
- Inflation expectations in Australia rise to 4.8%, supporting the Aussie Dollar.
- US economic data including consumer sentiment and inflation expectations due Friday could set the next directional move.