The AUD/USD pair edges higher in European trading on Monday, rising around 0.11% to 0.6555, as the Australian Dollar (AUD) outperforms most major peers ahead of the Reserve Bank of Australia’s (RBA) monetary policy announcement scheduled for Tuesday.
Market Focus: RBA Expected to Hold Rates Steady at 3.6%
Economists widely expect the RBA to keep its Official Cash Rate (OCR) unchanged at 3.6%, as policymakers continue to assess the balance between persistent inflation and slowing growth momentum.
Recent data from the Australian Bureau of Statistics showed that inflationary pressures accelerated in the third quarter. The Producer Price Index (PPI) rose 1.0% in Q3, outpacing expectations of 0.8% and the previous 0.7% reading. Similarly, the Consumer Price Index (CPI) climbed 1.3%, higher than both the forecast 1.1% and the prior 0.7%.
This pickup in inflation has prompted some traders to speculate that the RBA may retain a slightly hawkish tone, keeping the door open for future tightening if price pressures persist.
US Dollar Strength Limits AUD Upside
While the Aussie is gaining modestly ahead of the RBA, its advance remains capped by broad US Dollar (USD) strength. The US Dollar Index (DXY) touched a fresh three-month high near 99.90 as expectations for aggressive Fed rate cuts continue to fade.
According to the CME FedWatch Tool, the probability of a 25 basis point rate cut by the Federal Reserve at its December meeting has dropped to 67.8%, down sharply from 94.4% a week earlier. The shift reflects a reassessment of the Fed’s monetary path following a series of hawkish comments from policymakers and strong US economic data.
Australian Dollar Snapshot
| Base | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| AUD | 0.05% | 0.27% | 0.31% | 0.11% | 0.22% | — | 0.09% | 0.32% |
The Australian Dollar is currently the strongest performer against the Swiss Franc, while also showing broad-based gains versus other major currencies.
Outlook
Traders will closely watch the RBA’s policy statement and Governor Michele Bullock’s commentary for guidance on inflation, growth, and potential future policy adjustments. A hawkish hold could provide further support for the Aussie, while any dovish signals might see AUD/USD retrace recent gains.