The Australian Dollar (AUD) is holding steady against the US Dollar (USD) on Friday, managing to recover slightly after two consecutive days of gains. Increased buying interest in the AUD follows a string of mixed US economic data, which seems to have weighed down on the USD. While traders are monitoring various economic indicators, there’s a prevailing expectation that the Reserve Bank of Australia (RBA) will maintain its current monetary policy when it meets in September.
Factors behind the recent stabilizing value of the AUD include optimistic economic indicators from Australia that have alleviated some concern about potential policy adjustments by the RBA. Market analysts have pegged the likelihood of unchanged policy at around 86%, underscoring a growing confidence in Australia’s economic resilience.
Recent data from Australia shows a rise in Consumer Inflation Expectations, which increased to 4.7% in September, up from a five-month low of 3.9% in August. This uptick is primarily attributed to strengthened domestic demand, raising apprehensions regarding renewed inflationary pressures. RBA Governor Michele Bullock has acknowledged that the private sector is beginning to exhibit “a little bit more growth,” framing this as a positive development for the economy.
In contrast, the USD is attempting to recover from prior weaknesses, with the US Dollar Index (DXY) trading around 97.60. Economists will be especially focused on the upcoming release of the Michigan Consumer Sentiment Index later today, which is expected to shed light on consumer confidence and spending trends—critical drivers of the US economy.
The latest US Consumer Price Index (CPI) shows an annual increase of 2.9% in August, a rise from July’s 2.7%. On a monthly basis, CPI inflation increased by 0.4%, higher than the previous month’s 0.2% growth. In a related manner, core CPI, excluding volatile food and energy prices, also showed an increase to 3.1% year-over-year.
Initial jobless claims also presented a rather somber picture, rising to 263,000, marking the highest level since 2021, against an expected figure of 235,000. Meanwhile, the US Producer Price Index (PPI) showed a year-over-year decline to 2.6% from July’s 3.3%, indicating some easing in wholesale price pressures.
Further complicating the economic landscape, preliminary estimates indicate that the total Nonfarm employment may face a downward revision by approximately 911,000 jobs from March 2025 projections, suggesting a potential softening in the labor market.
In international news, China’s Consumer Price Index has also presented concerning figures, declining by 0.4% year-over-year in August after showing no growth in July. This decline, occurring amidst expectations of a slight decrease, raises questions about the economic health of one of Australia’s major trading partners.
Market analysts are keeping a close watch on the AUD’s technical positioning, which is trading around 0.6660 against the USD. The upward movement within an ascending channel pattern is maintaining a bullish outlook, with potential targets identified at the 0.6680 resistance level and an 11-month high of 0.6687. Conversely, initial support is seen at the nine-day Exponential Moving Average (EMA) around 0.6598, followed by further support around 0.6560. A breach below this channel could jeopardize the current bullish sentiment.
As the financial community looks ahead, there are projections suggesting that additional policy easing may be necessary, with a possible RBA rate cut of 25 basis points anticipated in November, followed by subsequent reductions in 2026, as the Australian economic recovery appears to be gradually taking shape.
