Australian Dollar extends losses as markets weigh mixed data and await RBA decision

• AUD/USD retreats towards 0.7000 as losses deepen from last week's high of 0.7068.
• Mixed Australian releases and strong Chinese manufacturing data leave the Aussie without support.
• A fifth interest rate increase this year is widely anticipated from the RBA on Tuesday.

Mixed Australian economic releases and robust Chinese manufacturing figures have offered little support to the Australian Dollar (AUD) on Monday, leaving it among the weakest major currencies as it loses further ground against the US Dollar (USD). At the start of the European session, AUD/USD is trading at 0.7015, close to the 0.7000 area that marks the lower end of its trading range over the past two weeks.

Monday's earlier Australian releases painted a mixed picture. The S&P Global Manufacturing Purchasing Managers' Index (PMI) fell to 49.6 in October, signalling a faster contraction rather than the unchanged 49.7 reading forecast. Building Permits provided a brighter spot, rebounding 5.1% in September to reverse August's 5.2% decline and comfortably exceed market expectations of a 2.1% increase.

Meanwhile, China’s RantingDog Manufacturing PMI showed activity expanding at a reading of 52.0  in October. Although lower than September's 52.1, the figure exceeded the market forecast of 51.6.

Aussie faces a pivotal RBA decision as inflation prospects deteriorate

Tuesday's monetary policy announcement from the Reserve Bank of Australia (RBA) is the main event on Australia's calendar this week. According to Rabobank analysts, the central bank is “widely tipped to deliver another 25bp rate rise,” a move that would “mark the fifth rate rise this year and take the cash rate target up to 4.85%.”

The changing inflation picture is also highlighted by Rabobank. It cites recent comments from RBA Deputy Governor Hauser, who described Australia's inflation outlook as “materially worse” and warned that, given “pending events in the Middle East this week, it might get even worse.”

Attention in the US centres on Tuesday's midterm elections, with expectations that the balance of power will change in Congress and possibly even in the Senate. That result would be likely to produce a debt-ceiling impasse in 2027 and could also slow data centre construction plans, just as uncertainty gathers over the AI sector.

Ahead of the vote, forecasts point to strong growth in the US ISM Services PMI. Such a reading would lend weight to the narrative of US economic exceptionalism and bolster the argument for a Federal Reserve interest rate increase in December.