AUD/USD rallies on US-China trade deal hopes as Q3 CPI looms

Stable close for AUD/USD as volatility remains subdued

AUD/USD finished flat last week at 0.6514 (+0.01%), recording its tenth consecutive daily close within 15 pips of 0.6500 on Friday.

Subdued trading in AUD/USD and most major currency pairs, except the USD/JPY, in recent weeks reflects evaporating foreign exchange (FX) volatility, largely due to the absence of Tier-1 US data amid the ongoing government shutdown. This shutdown is now in its 27th day, just eight days shy of the 35-day record set in 2018–2019.

US-China trade deal lifts AUD/USD

This week has kicked off on a livelier note, with AUD/USD surging to a two-week high of 0.6545 following reports that US and Chinese negotiators reached a preliminary trade framework over the weekend. This deal is pending final approval by Presidents Donald Trump and Xi Jinping at the Asia-Pacific Economic Cooperation (APEC) summit in South Korea later this week.

If signed, the deal would ease fears of a global slowdown and help bolster risk sentiment into year-end. Beyond trade, the key driver for AUD/USD this week will be Wednesday’s third quarter (Q3) consumer price index (CPI) release, previewed below, ahead of next week’s Reserve Bank of Australia (RBA) interest rate meeting.

AU: Q3 CPI

Date: Wednesday, 29 October at 11.30am AEDT

In the June 2025 quarter (Q2), headline inflation rose by 0.7%, which saw the annual rate of headline inflation ease to 2.1%, the lowest annual inflation rate since March 2021.

The RBA’s preferred measure of inflation, the trimmed mean, rose by 0.6% in Q2, allowing the annual rate to fall to 2.7% from 2.9% prior. This marked a tenth quarter of lower annual trimmed mean inflation and equalled the lowest rate of trimmed mean inflation since the December quarter of 2021.

Since then, the market has received two firmer monthly CPI reports driven by headline strength, prompting more hawkish RBA commentary before the release of a much weaker-than-expected labour force update for September.

The market consensus is for Q3 2025 headline inflation to rise 1.0% quarter-on-quarter (QoQ), and for the annual rate of headline inflation to rise to 3.0%. The trimmed mean is expected to increase by 0.8% QoQ, which would see the annual rate remain at 2.7%.

Irrespective of whether the Q3 inflation report shows trimmed mean inflation marginally above the RBA’s forecast, we continue to think the RBA should cut rates by 25 basis points (bp) next week to 3.35%, and follow the path of least regret given the downside risks to the Australian labour market.

The Australian interest rate market is pricing in 16 bp (64% chance) of a 25 bp rate cut at next week’s RBA board meeting and a cumulative 45 bp of RBA cuts between now and August 2026.

AU all groups CPI and trimmed mean chart

AUD/USD technical analysis

Technically, AUD/USD is attempting to bounce away from the support coming from the bottom of the trend channel, which it has been encapsulated within for the past five months.

Providing AUD/USD continues to hold above 0.6480 (trend channel support) and above a strong band of support at 0.6435 - 0.6410 (coming from the August lows and the 200-day moving average), allow for a rebound back towards 0.6600 - 0.6620.

Aware that if AUD/USD was to first see a sustained break of support at 0.6480 and then below support at 0.6435–0.6410, it would warn that a deeper pullback, initially towards 0.6300, is underway.

AUD/USD daily chart

• _{Source: TradingView. The figures stated are as of 27 October 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}