The Australian Dollar (AUD) extended its decline on Friday, with AUD/USD trading around 0.6540, down 0.2% during the European session. The pair came under pressure as the US Dollar (USD) gained broadly, supported by easing expectations of imminent Federal Reserve rate cuts and optimism surrounding a potential US–China trade deal.
At the time of writing, the US Dollar Index (DXY) — which measures the Greenback’s performance against six major currencies — was hovering near a three-month high of 99.70, reached on Thursday.
Fed Outlook and US–China Trade Developments
Market sentiment shifted after Federal Reserve Chair Jerome Powell said a December rate cut was “far from assured,” emphasizing that policymakers held “strongly different views” and that no final decision had been made. According to the CME FedWatch Tool, the probability of a 25-basis-point cut at the December meeting has dropped to 72.8%, down from 91.1% a week earlier.
Adding to USD strength, US Treasury Secretary Scott Bessent revealed that the “Kuala Lumpur Agreement” — a trade pact between the United States and China — had been finalized overnight, with formal signatures expected as soon as next week. The potential deal has been viewed as a positive development for global trade and risk sentiment.
Australia’s Inflation Data and RBA Outlook
In Australia, inflation pressures continue to build, reducing expectations of further monetary easing by the Reserve Bank of Australia (RBA) this year. Following a stronger-than-expected Q3 Consumer Price Index (CPI) report, producer inflation also surprised to the upside.
The Producer Price Index (PPI) rose 1.0% quarter-on-quarter for July–September, beating forecasts of 0.8% and the previous reading of 0.7%, according to data released Friday by the Australian Bureau of Statistics (ABS).
While stronger inflation typically supports the Aussie Dollar, the currency has been unable to capitalize as the broader market remains dominated by US Dollar strength.
US Dollar Performance This Week
| USD vs. | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|
| Change (%) | +0.54 | +1.44 | +0.76 | 0.00 | –0.05 | +0.93 | +0.71 |
The US Dollar was the strongest against the British Pound this week, reflecting robust demand across global markets.
Outlook
While the upcoming US–China trade deal could offer some medium-term support for the Australian Dollar due to Australia’s trade ties with China, short-term momentum favors the Greenback. With traders scaling back Fed rate-cut bets and the DXY holding near multi-month highs, AUD/USD may struggle to reclaim upward ground in the near term.
