AUD/USD Holds Its Ground Above 0.6600 as Markets Await Critical US Inflation Report

The AUD/USD pair is taking a pause near the 0.6600 level during Asian trading on Friday, hovering just shy of its two-month peak established the previous session. While the momentum has stalled temporarily, the underlying bias remains decisively upward as traders brace for the release of the US Personal Consumption Expenditure (PCE) Price Index later today—a report that could significantly reshape near-term currency dynamics and influence the USD to AUD conversion rates.

Why PCE Data Matters for Your Portfolio

The Core PCE Price Index, set to drop at 13:30 GMT on December 5, 2025, ranks as the Federal Reserve’s top inflation barometer. This monthly gauge tracks price changes for goods and services across the US economy, with consensus expectations pointing to 2.9% year-over-year growth—unchanged from October’s reading. However, even a modest beat or miss could alter Fed rate-cut expectations and send ripples through FX markets.

Here’s the critical connection: if inflation comes in hotter than anticipated, it might temper aggressive rate-cut bets, potentially strengthening the USD. A weaker-than-expected reading, conversely, could reinforce the narrative of cooling economic activity and boost risk assets like the Australian Dollar.

The Policy Divergence Play

The real fuel driving AUD/USD higher stems from a widening gap between Federal Reserve and Reserve Bank of Australia (RBA) policy trajectories. On the US side, mounting evidence of economic softening and labor market cracks have traders pricing in a 90% probability of a 25 basis point rate cut next week. Multiple Fed officials have signaled December’s cut as nearly certain.

Across the Tasman, RBA Governor Michele Bullock recently cautioned that inflation hasn’t yet sustainably returned to the central bank’s 2-3% target band. Critically, she warned that if current price pressures prove persistent, the RBA may need to tighten policy next year rather than ease—a hawkish stance that underpins the Aussie.

Market Consolidation: A Breath Before the Move

The technical picture shows the pair consolidating around the 0.6600 round number—a healthy pause within a two-week uptrend. This consolidation phase isn’t weakness; it’s bulls catching their breath ahead of a potentially directional catalyst. The divergent monetary policy backdrop provides a structural tailwind, meaning even after today’s PCE release, upward pressure on the AUD/USD pair should persist.

For those tracking USD to AUD conversions, this consolidation represents a key decision point. A PCE surprise to the downside could accelerate the pair higher, while a significant beat might trigger profit-taking. Either way, the fundamental setup—hawkish RBA contrasting with dovish Fed expectations—continues to support the Australian Dollar’s outperformance against the greenback through year-end.

Key Takeaway: The AUD/USD pair is poised for another test higher once the PCE data lands. Traders should monitor not just the headline figure, but also forward guidance implications for Fed rate expectations in 2025.