The Australian dollar has defied bearish expectations this week, thanks to a weaker US dollar and hawkish signals from the Reserve Bank of Australia (RBA). The market-implied odds of an RBA rate hike in November have surged from 25% to 50% following comments from Deputy Governor Andrew Hauser, who warned that inflation is worse than previously forecast. This shift has helped the Australian dollar emerge as one of the strongest currencies among FX majors.
Despite weaker employment data, with unemployment holding at a near five-year high of 4.7% in September, the RBA remains focused on controlling inflation. Major banks like Goldman Sachs, ANZ, and UBS now expect a 25 basis point hike in November, aligning with the RBA's stance. The next RBA meetings are scheduled for November 3 and December 8.
Technically, the AUD/USD pair has rallied over the past four days, moving back above last week’s doji low. However, resistance levels near 0.7050 and 0.7075 could limit further gains. The AU-US two-year yield spread has yet to confirm the rally, adding caution for bulls. Meanwhile, the New Zealand dollar has outperformed the Australian dollar, pushing AUD/NZD down by 1% over five days.
Other currency pairs involving the Australian dollar show mixed results. AUD/USD gained 0.69% over five days, trading at 0.7028, while AUD/JPY rose 0.72% over the same period. The Aussie also strengthened against the euro but lost ground against the Canadian dollar, British pound, and Swiss franc.