Aussie Dollar Eases Off Highs Ahead of RBA Meeting
AUD
The Australian Dollar opens slightly lower across the major currencies at 0.7032, taking a slight breather following its recent post-CPI surge. Wednesday's hot quarterly inflation print, showing trimmed mean CPI rising 1.0% q/q and headline inflation at 4.3% y/y, continues to provide strong underlying support for the Aussie. Local equities finished higher yesterday with the ASX 200 up 0.5% led by financials, while Brent Crude remains elevated near $116 a barrel due to ongoing Middle East tension. Markets are now pricing in an 80%+ chance of a 25bps interest rate hike to 4.85% at Tuesday's RBA meeting (3 November). Despite domestic unemployment ticking up to a 5-year high of 4.7%, sticky inflation keeps the RBA firmly focused on monetary tightening after this meeting.
USD
The AUD/USD opens slightly lower at 0.7032. The Federal Reserve voted 10–2 to keep its benchmark interest rate unchanged at 4.00% at its October 28 meeting. Fed Chair Warsh emphasised that politics played "no role" in the decision ahead of the upcoming US midterm elections, reiterating that "inflation remains elevated" and that the central bank remains committed to its 2% target. Because the hold landed directly on market expectations, immediate currency movement was muted; however, Fed funds futures and the dot plot indicate a December rate hike is far more likely. Wall Street softened into Thursday's close dragged down by a tech sell-off (Nasdaq -1.4%, S&P 500 -0.4%, Dow -0.3%), while traders now look toward next Tuesday’s US Congressional Midterm Elections as the next major political and market catalyst.
EUR
The AUD/EUR cross dipped half a percent to open at 0.6291, pulling back from recent 3.5-year highs. The European Central Bank left its main refinancing rate unchanged at 2.65% as expected, but Christine Lagarde’s press conference struck a surprisingly hawkish tone. Lagarde highlighted energy-driven upside risks to inflation while noting downside risks to economic growth, keeping a potential December rate hike firmly on the table. European stock markets closed higher (DAX +1.3%, CAC +1.1%), with currency markets turning their focus to today's upcoming Eurozone flash GDP release.
GBP
The AUD/GBP pair opens lower at 0.5291 as Sterling strengthened into next week's Bank of England policy decision. The UK’s FTSE 100 closed modestly higher (+0.3%), mirroring gains in Europe. With no major UK economic releases overnight, market attention is firmly fixed on next Thursday’s (5 November) BoE meeting, where markets are heavily pricing in a 25bps rate hike to 4.00%, bringing UK interest rates closer in line with Australia's.
NZD
The AUD/NZD pair eases back to 1.2481 after reaching fresh 13.5-year highs earlier in the week. The cross continues to be anchored by the Reserve Bank of New Zealand's 4-3 decision on Wednesday to hold its interest rate at 2.75% against market expectations of a hike. While the broader interest rate differential heavily favours the AUD, overnight risk sentiment and USD positioning drove a mild pullback on the cross. New Zealand markets look ahead to next Wednesday's domestic unemployment figures for their next directional cue.