Australian Dollar Holds Firm as US Dollar Loses Momentum Ahead of Key Fed Speeches

RBA rate cut prospects fade as inflation stays elevated

The Australian Dollar (AUD) strengthened against the US Dollar (USD) on Thursday, recovering losses from the previous session as the Greenback steadied ahead of critical US economic updates. Traders are closely watching the second-quarter US Gross Domestic Product (GDP) release and upcoming Federal Reserve (Fed) speeches for policy signals.

Australia’s Monthly Consumer Price Index (CPI) for August rose 3.0% year-over-year, up from July’s 2.8%, easing speculation of a near-term Reserve Bank of Australia (RBA) rate cut. Market expectations for a November cut fell to 50% from nearly 70% before the inflation release, according to Reuters.

RBA Governor Michele Bullock acknowledged softer labor market conditions, noting a slight uptick in unemployment. She added that prior rate cuts should support household and business spending but emphasized that the RBA remains vigilant and prepared to act if conditions shift further.

US Dollar under pressure as Fed outlook divides

• The US Dollar Index (DXY) eased from its weekly high near 97.80, reflecting renewed caution ahead of Fed remarks.
• San Francisco Fed President Mary Daly said more rate cuts may be needed to restore price stability and protect jobs.
• In contrast, Chicago Fed’s Austan Goolsbee signaled hesitation on additional cuts, diverging from the broader policy tone.
• Fed Chair Jerome Powell reaffirmed last week’s 25-basis-point cut, citing a weaker labor market as the main concern. He added that the Fed is comfortable with its current stance but remains open to further easing if necessary.

Economic data showed slowing US momentum, with September’s S&P Global Composite PMI slipping to 53.6 from 54.6. The Manufacturing PMI dropped to 52.0 from 53.0, while the Services PMI eased to 53.9 from 54.5, signaling softer demand.

Geopolitical headlines also weighed on sentiment. The White House confirmed progress on TikTok’s US operations, with American companies expected to oversee its algorithm. Meanwhile, President Donald Trump is set to meet Australian Prime Minister Anthony Albanese on October 20 to discuss the Aukus defense pact.

Weak PMI data weighs on Australian outlook

Australia’s preliminary S&P Global Composite PMI fell sharply to 52.1 in September, down from 55.5 in August, the lowest in three months. Both manufacturing and services recorded slower growth, with weaker new orders and softer demand. The Manufacturing PMI dropped to 51.6, while the Services PMI slipped to 52.0, highlighting the cooling pace of expansion.

Markets now price only a 20% chance of a September RBA cut and a 70% chance in November, as policymakers balance inflation risks with slowing growth.

Technical outlook: AUD/USD capped below 0.6600

The AUD/USD pair traded near 0.6590 on Thursday, just under the nine-day Exponential Moving Average (EMA) at 0.6602, which acts as initial resistance. A sustained break above this level could open the door toward September’s 11-month high at 0.6707.

On the downside, initial support is seen at the 50-day EMA near 0.6550, aligned with a key psychological level. A decisive drop below could expose August’s low of 0.6414.

The 14-day Relative Strength Index (RSI) hovers slightly above 50, signaling that a modest bullish bias remains in play despite weak near-term momentum.

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