AUD/USD trades at 0.6844 as a 0.67% gain in the US Dollar Index to 102.91 highlights widening policy divergence between the hawkish Federal Reserve and a neutral Reserve Bank of Australia.
October US core CPI rose 0.3% MoM for a third straight month and headline CPI of 0.4% beat the 0.3% estimate, cementing Fed hike bets (87% priced for 25 bps) while the RBA is expected to hold and even cut 28 bps in 2027. AUD/USD already fell 0.27% to 0.6844 and technicals show sellers in control below the 0.7028 SMA cluster.
October core CPI rose 0.3% MoM as Fed Governor Waller had warned, and headline CPI beat at 0.4% versus 0.3% expected, reinforcing Fed tightening expectations. The DXY gained 0.67% to 102.91 after hawkish Fed remarks, hovering near an 18-month high of 102.96.
The Aussie lost 0.27% versus the US dollar and underperformed all major currencies except the New Zealand dollar, as the Fed's tightening path contrasts with an RBA expected to hold and cut 28 bps in 2027. The policy divergence widens unless upcoming Australian inflation expectations surprise.
The Australian Dollar fell 0.27% to 0.6844 on Wednesday as persistent US inflation data reinforced expectations for further Federal Reserve tightening. With October core CPI rising 0.3% MoM, markets now price an 87% chance of a 25 bps rate hike, while the RBA is expected to hold rates and potentially cut by 28 bps in 2027.
Hotter-than-expected US inflation has boosted expectations of further Federal Reserve rate hikes while the Reserve Bank of Australia is seen holding, and possibly cutting in 2027, so AUD/USD dropped 0.27% below 0.6850.
Resistance sits at 0.6926 and the SMA cluster near 0.7028, while firm support only appears around 0.6343, leaving the pair vulnerable to further losses while capped below those barriers.
Sticky US inflation, with October core CPI up 0.3% MoM for a third straight month and headline beating estimates, has strengthened Fed rate-hike expectations, lifting the DXY 0.67% to 102.91.
Markets speculate the RBA has finished its tightening cycle and will hold rates, with Prime Terminal data showing 28 basis points of cuts expected in 2027.