Aussie Consolidates Near Two-Month Peak as PCE Inflation Report Looms

AUD/USD trades laterally around the 0.6600 level, hovering just beneath a multi-week high, while markets await critical US inflation data. Policy divergence between the Federal Reserve and Reserve Bank of Australia continues to underpin the Australian currency. Spot prices are positioned for a second consecutive week of robust gains, contingent on how the PCE release reshapes rate-cut expectations.

What’s Driving the AUD/USD Move Today?

The Australian dollar maintains its strength against the greenback during Asian trading Friday, as investors adopt a cautious stance ahead of today’s release of the US Personal Consumption Expenditures (PCE) Price Index for October. The currency pair has established itself as an attractive play for bulls, though tactical profit-taking appears to be keeping momentum in check near current levels—precisely where it tested a nearly two-month high just yesterday.

The fundamental picture remains constructive for the Aussie. Recent US economic data has painted a picture of gradual economic deceleration, with mounting evidence of labor market softening. Multiple Federal Reserve officials have signaled that another rate cut in December is virtually assured, with futures markets now pricing in a 90% probability of a 25 basis point reduction next week. This shift has weighed on the US Dollar, preventing it from recovering toward the highs it touched in late October.

Simultaneously, the RBA’s stance has taken on a more hawkish tilt. Governor Michele Bullock acknowledged this week that inflation remains above the central bank’s 2% to 3% target range, and suggested the RBA is scrutinizing recent price pressures closely. Should these inflationary forces prove persistent, the RBA could face pressure to raise rates next year—a scenario that bolsters the Australian unit and supports the broader AUD/USD rally.

PCE Data: The Key Catalyst Ahead

The Personal Consumption Expenditures Price Index—the Fed’s preferred inflation gauge—is set to be published later today. Markets are bracing for a core PCE figure of 2.9% year-on-year, unchanged from the previous month’s reading.

For currency traders and central bank watchers, this data carries outsized importance. A reading that surprises to the upside could inject hawkish undertones into Fed guidance, potentially supporting the Dollar and capping the current AUD/USD strength. Conversely, a softer-than-expected print would reinforce expectations for another December rate cut, providing additional tailwinds for the currency pair. Investors converting funds at the current levels should keep in mind that 10 AUD to USD translates to approximately 6.60 USD at present spot rates, though this conversion could shift materially depending on the PCE outcome.

RBA-Fed Policy Divergence: The Structural Support

The most compelling backdrop for AUD/USD remains the starkly different policy trajectories of the two central banks. While the Federal Reserve appears to be in a cutting cycle, the RBA is contemplating tightening. This structural divergence has proven to be a powerful tailwind for the Australian dollar and explains much of the pair’s two-week rally.

Bullock’s recent parliamentary testimony underscored that the RBA is not yet comfortable declaring victory on inflation. Should price pressures persist, rate hikes could materialize in 2025—a prospect that positions the Aussie as a relative outperformer against a weakening US Dollar.

Technical Positioning

The AUD/USD pair remains poised for a second successive week of meaningful gains. The 0.6600 level has emerged as a critical support-resistance zone, with bulls pausing to digest before potentially targeting higher ground. The broader two-week uptrend remains intact, though traders are clearly opting to wait for more guidance from the PCE figure before committing fresh capital to longer positions.

The currency pair’s resilience above round figures suggests underlying conviction among institutional buyers, particularly those wagering on continued Fed easing and RBA patience—or outright tightening—to persist through the near term.