AUD/USD remains under pressure at 0.6910 as a dovish RBA outlook offsets US Dollar strength ahead of key labor market data.
AUD/USD sits around 0.6910 after losing over 1% the previous day, as the RBA's split 6–3 hike to 4.85% on November 3 and the removal of explicit tightening language point to a possible pause in December. A less hawkish RBA path reduces Australia's rate advantage, while OCBC sees the broader macro backdrop favouring the Dollar. Risk-off caution ahead of the US Nonfarm Payrolls report also supports the USD side of the pair.
The Reserve Bank of Australia raised rates to 4.85% but only by a 6–3 vote and dropped language about future tightening, suggesting a possible pause in December. That weaker rate outlook hurt the Aussie, while the US Dollar drew support from caution ahead of the US jobs report.
The article points to falling US bond yields, hopes for diplomatic progress with Iran and expectations of political gridlock in Washington, all of which have kept the safe-haven Dollar on the back foot and could limit AUD/USD losses.
The Australian Dollar lost ground after the RBA's November 3 hike to 4.85% passed on a split 6–3 vote with softened guidance, damping expectations of further rate hikes and pointing to a possible December pause. Even Deputy Governor Hauser's warning that inflationary pressures remain very high did not prevent the currency's decline against the USD.
Yes, on November 3 the RBA raised the cash rate by 25 basis points to 4.85%. But the 6–3 split vote and the removal of language about future tightening suggested a pause may come in December, which dampened expectations of further hikes and weighed on the currency.
The Dollar found support from widespread caution ahead of the US Nonfarm Payrolls report, which is critical for the Fed's December decision, and OCBC argues the macro backdrop continues to favour the USD. However, that support was counterbalanced by declining US bond yields, diplomatic hopes with Iran, and gridlock expectations after the Democrats' victory that could slow US growth.
Strategists at OCBC retain a view that the USD should remain supported, citing solid US growth, sticky inflation and the Fed on track for further tightening, but they note greater two-way risks given conflicting signals like falling US yields and political gridlock expectations.
The Australian Dollar trades near 0.6910 following a 1% decline as the Reserve Bank of Australia's split 6-3 vote and softened guidance suggest a potential pause in rate hikes. While the RBA raised rates to 4.85%, the removal of explicit tightening language has dampened bullish sentiment for the Aussie. Meanwhile, the US Dollar remains supported by market caution ahead of the critical Nonfarm Payrolls report.
The RBA's decision to remove explicit tightening language and the split 6-3 vote on the recent rate hike suggest a potential pause in December, reducing the Aussie's rate advantage.
Strategists at OCBC maintain a supportive view for the USD, citing solid growth and sticky inflation, though they acknowledge risks from political gridlock and falling bond yields.