AUD/USD rises on strong AU CPI and dovish FOMC outlook 

Australian dollar rallies after inflation beats forecasts

AUD/USD wrapped up last week on a firm note, settling at 0.6550 for a 1.45% gain – its highest weekly close in eight weeks. The Australian dollar's rise was fuelled by several supportive factors.

On Wednesday, Australia’s monthly consumer price index (CPI) for October was hotter than expected. Headline inflation rose by 3.8% year-on-year (YoY) in October, and the trimmed mean measure rose by 3.3%. This resulted in the Australian interest rate market moving from pricing in a modest chance of a Reserve Bank of Australia (RBA) rate cut in 2026 to a modest chance of a rate hike. Additionally, the same day saw the Reserve Bank of New Zealand (RBNZ) deliver a hawkish 25 basis point (bp) rate cut, signalling it was likely done cutting interest rates.

Meanwhile, expectations for next week’s Federal Open Market Committee (FOMC) meeting saw a dovish repricing, with the implied probability of a 25 bp cut on 10 December soaring from around 30% in mid-November to approximately 85% today.

This rapid shift in Federal Reserve (Fed) and RBA rate expectations, alongside buoyant risk appetite, enabled AUD/USD and other risk-sensitive currencies to stage an impressive rally by week’s end.

Key factors for AUD/USD outlook

Looking forward, three key factors will determine whether AUD/USD can continue its ascent.

1. Global risk sentiment: must maintain the positive tone from last week. This premise is currently being tested, with US S&P 500 equity futures trading 0.67% lower at 6813, weighed down by a sell-off in Japanese government bonds and the Nikkei225 /on rising expectations of a Bank of Japan (BoJ) rate hike in December.
2. Upcoming US data releases: including September’s core personal consumption expenditures (PCE) inflation, personal income and spending figures, and November’s Institute for Supply Management (ISM) purchasing managers’ indexes (PMIs), will be important. Particular focus will be on the ISM services PMI, given that services account for approximately 70% of US gross domestic product (GDP), and its employment sub-index offers valuable insights into the state of the US labour market.
3. Q3 Australian GDP release: is scheduled for Wednesday and previewed below.

Q3 GDP

Date: Wednesday, 3 December at 11.30am AEDT

In the second quarter (Q2) of 2025, Australian GDP increased by 0.6%, accelerating from 0.3% in the prior quarter, for an annual rate of 1.8%. It was the Australian economy’s 15thconsecutive quarter of growth.

The number was stronger than expected, driven by a sharp rebound in household consumption, providing evidence the RBA’s rate-cutting cycle is gaining traction.

As we await the final partial components that feed into Wednesday’s GDP print, the preliminary forecast is for a rise of 0.7% quarter-on-quarter (QoQ), lifting the annual growth rate to 2.2% – the fastest pace of annual growth since Q1 2023.

AU GDP chain volume measures chart

AUD/USD technical analysis

After reaching a high of 0.6617 at the end of October, AUD/USD fell to a three-month low of 0.6419 on 21 November. That low was in the vicinity of the 0.6420 support zone, which has repeatedly held as a floor in AUD/USD since early August.

From that point, AUD/USD has been able to fight back, climbing above the 200-day moving average, currently near 0.6465, before reaching and breaching resistance at 0.6520. This opens up a test of the next upside resistance level at 0.6620 – 0.6630, a region that has capped AUD/USD since late September.

Be aware that if AUD/USD sees a sustained break below 0.6420 – 0.6400, it would invalidate the near-term bullish structure and signal a deeper correction is underway, initially towards 0.6300.

AUD/USD daily chart

• _{Source: TradingView. The figures stated are as of 1 December 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.}