AUD/USD Faces Balanced Rate Backdrop in Q4 Amid RBA and Fed Hikes

The Australian dollar's Q4 outlook is dominated by monetary policy, as both the RBA and Fed have resumed tightening measures. The RBA is expected to deliver at least one more hike, while persistent inflation keeps policymakers on alert. This leaves AUD/USD with a more balanced rate backdrop than it did entering Q3.

Australian rate expectations have risen sharply, yet the Aussie has still retreated from its Q3 highs due to US dollar strength and broader risk sentiment outweighing the increasingly supportive yield differential.

The question for Q4 is whether rising unemployment gives the RBA enough room to maneuver, as some argue that it may provide policymakers with a buffer against further rate hikes.