Amid hawkish RBA and weak USD, Australian Dollar pauses corrective slide from monthly high

  • Selling pressure on AUD/USD remains limited despite a retreat from a new monthly high.
  • Risk appetite weakens on Middle East concerns, putting the risk-sensitive Aussie under pressure.
  • A hawkish RBA helps cushion losses as declining bond yields push the USD to a three-week low.

Selling pressure returns to AUD/USD on Thursday after a fresh monthly high, ending four consecutive days of gains. The retreat interrupts a sizeable recovery from below 0.6900, the lowest levels since early July. Even so, further selling fails to gather momentum, with spot prices holding above the psychological 0.7000 mark during the first half of the European session.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

The risk-sensitive Australian Dollar (AUD) faces some selling as concerns over a further escalation in Middle East tensions dampen investor sentiment. Further declines in AUD/USD are nevertheless contained by recent hawkish remarks from Reserve Bank of Australia (RBA) officials and continued selling pressure on the US Dollar (USD).

On Monday, RBA Assistant Governor Christopher Kent noted reasonable indications of rising neutral interest rates, both in Australia and globally. Rate hike expectations ahead of the November 3 policy meeting were also sustained by RBA Deputy Governor Andrew Hauser’s warning earlier today that Q3 trimmed-mean inflation may exceed expectations.

The Aussie also draws support from China’s Q3 GDP reading, which surpassed expectations. By contrast, the USD slips to a fresh three-week low, extending its retreat from an 18-month peak. The decline follows recent signals from US Federal Reserve (Fed) officials that there is no urgency to increase interest rates at the October 27–28 meeting.

Additional support for AUD/USD comes from US bond yields, whose continued retreat from multi-year highs leaves USD bulls under pressure. However, traders bearish on the USD might hold off on aggressive positions until there is greater clarity on the Fed’s policy trajectory. Attention therefore turns to the outcome of the two-day FOMC meeting beginning Tuesday.

How Has the Australian Dollar Performed Over the Last 7 Days?

The Australian Dollar (AUD) recorded its strongest performance against the US Dollar over the last 7 days. Its percentage changes against the major currencies listed are set out in the table below.

USD EUR GBP JPY CAD AUD NZD CHF
USD -0.72% -1.59% -0.77% -1.54% -0.61% -1.64% -1.83%
EUR 0.72% -0.91% -0.07% -0.91% 0.10% -0.92% -1.16%
GBP 1.59% 0.91% 0.82% 0.02% 1.00% -0.10% -0.22%
JPY 0.77% 0.07% -0.82% -0.71% 0.19% -0.86% -1.02%
CAD 1.54% 0.91% -0.02% 0.71% 0.90% -0.15% -0.23%
AUD 0.61% -0.10% -1.00% -0.19% -0.90% -1.02% -1.18%
NZD 1.64% 0.92% 0.10% 0.86% 0.15% 1.02% -0.21%
CHF 1.83% 1.16% 0.22% 1.02% 0.23% 1.18% 0.21%

Percentage movements between major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. For instance, selecting the Australian Dollar on the left and following that row across to the US Dollar gives the percentage change for AUD (base)/USD (quote) in the corresponding cell.