## US CPI Surpasses Expectations, Boosting Rate Cut Bets, Australian Dollar Rises

Weak US economic data has sparked widespread market bets on a Fed rate cut in December. According to the CME FedWatch tool, the market currently prices in over an 84% probability that the Federal Reserve will cut the benchmark overnight borrowing rate by 25 bps at the December meeting, up significantly from 50% a week ago. This shift is driven by a recent series of soft US economic indicators.

The US Producer Price Index (PPI) in September remained at 2.7% year-over-year, in line with market expectations, but core PPI declined from 2.9% to 2.6%, below the expected 2.7%. Meanwhile, US retail sales increased by only 0.2% month-over-month, well below August’s 0.6% gain, reflecting cautious consumer spending attitudes. The latest data from the Conference Board shows the November Consumer Confidence Index fell from 95.5 in October to 88.7, a monthly decline of 6.8 points, hitting a recent low.

Fed officials have also shown some easing in tone. Fed Governor Christopher Waller told the media on Monday that the main concern is now the labor market’s softness, and he believes that with weak employment data, inflation is "no longer the primary concern." New York Fed President John Williams later commented that policymakers might still adjust rates "in the near term," further fueling market expectations for a December decision.

## Australian Dollar Maintains Rise After CPI Data Release

Contrasting with the US economic weakness, Australia’s October Consumer Price Index (CPI) rose 3.8% year-over-year, above the market forecast of 3.6%, and accelerated from 3.5% in the previous month. This unexpectedly strong data, released on Wednesday, helped the AUD/USD continue its upward trend, marking the fourth consecutive day of gains, with the current trading level around 0.6480.

The stronger-than-expected CPI data supports the Reserve Bank of Australia’s (RBA) policy stance. The market generally expects the RBA to keep the official cash rate unchanged at 3.6% in December. ASX 30-day interbank cash rate futures show the December 2025 contract trading at 96.41, implying only a 6% chance of a rate cut to 3.35%, reflecting market expectations of a hawkish RBA stance.

The RBA’s November monetary policy meeting minutes indicated a more balanced policy signal, suggesting that if upcoming data remains strong, the central bank may extend its pause on rate hikes. RBA Assistant Governor Sarah Hunter noted that "super-trend growth could intensify inflationary pressures," and the bank will not overreact to single-month data but will continue to closely monitor labor market capacity and policy transmission.

Australia’s November economic activity also showed resilience. The S&P Global Manufacturing PMI rose to 51.6 from 49.7 last month; Services PMI increased from 52.5 to 52.7; Composite PMI rose from 52.1 to 52.6, with multiple indicators showing improvement.

## AUD/USD Technical Outlook: 0.6500 Psychological Level in Focus

From a technical perspective, AUD/USD traded around 0.6480 on Wednesday, with the daily chart showing slight fluctuations within a rectangular consolidation zone, indicating a neutral to slightly sideways pattern. The pair is currently below the 9-day exponential moving average (EMA), with short-term momentum still lacking.

Support levels are near the lower boundary of the rectangle at 0.6420, with further support at the five-month low of 0.6414 recorded on August 21. On the upside, if the pair can break above the 0.6479 level of the 9-day EMA, it could test the psychological 0.6500 level. If momentum persists, the upper boundary of the rectangle at 0.6630 will become a more distant target.

## US Dollar Index Under Pressure, AUD Strengthens

The US Dollar Index (DXY), which measures the dollar’s value against six major currencies, is currently around 99.80. After a slight decline in the previous trading session, it stabilized. Rising expectations of rate cuts continue to exert downward pressure on the dollar, contrasting sharply with the relative strength of the Australian dollar.

The AUD has generally appreciated against major currencies, with the most notable gains against the Japanese yen, and positive performance against the euro, pound, and others, reflecting market optimism about Australia’s economic fundamentals and interest rate policies.