The Australian Dollar (AUD) is gaining against the US Dollar (USD) thanks to a weaker greenback, which is affected by the ongoing US government shutdown and poor PMI data. Currently, the AUD/USD pair is around 0.6600, marking its first potential weekly gain in three weeks. The US Dollar Index is nearing 97.72. The Institute for Supply Management reported that the Services PMI dropped to 50 in September from 52 in August. Similarly, S&P Global’s data shows a slowdown in the services sector, with the US Services PMI falling to 54.2 from 54.5, and Australia’s dropping to 52.4 from 55.8.

The Impact of Soft Services Data

Soft services data may lead the Federal Reserve to continue easing monetary policy. A 25 basis-point interest rate cut is expected soon, with an 85% chance of another cut in December. The Reserve Bank of Australia (RBA) kept its cash rate steady at 3.60%, signaling a cautious approach that depends on upcoming data for future decisions. Interest-rate swaps show a 36% chance of a 25-bps cut in November, down from 55%, and about a 50% chance in December. The RBA’s quantitative easing and tightening could also impact the AUD, with easing potentially weakening the currency and tightening likely strengthening it. As of today, October 4th, 2025, the AUD/USD pair is holding strong around 0.6600. This strength arises mainly from a weakened US dollar due to the government shutdown and poor economic figures. The pair is poised for its first weekly gain in three weeks, indicating a potential momentum shift. The recent US ISM Services PMI data, which fell to 50, raises major concerns, as this level indicates zero growth in the services sector. This trend supports expectations that the Federal Reserve will have to loosen its monetary policy and cut interest rates later this month. Markets are pricing in a nearly certain 0.25% rate cut in October and a strong possibility of another cut in December.

Potential Opportunities for Traders

Looking at the 2018-2019 shutdown, which lasted 35 days, prolonged political uncertainty can significantly hurt the US dollar. The current economic slowdown is evident, as the S&P Global Services PMI has dropped for two consecutive months. This trend gives us more confidence that the Fed will act soon. In contrast, the RBA is taking a more cautious route, keeping its cash rate at 3.60%. The RBA has indicated that any future rate changes will rely heavily on inflation and wage data. This suggests that rate cuts will happen at a much slower pace compared to expectations in the US. For derivative traders, the growing divergence between Fed and RBA policies presents a trading opportunity. This outlook supports strategies that could profit from a rising AUD/USD, like buying call options on the Australian dollar or using futures to go long on the pair. These positions would be profitable if the US dollar continues to weaken more than the AUD. However, we should also pay attention to Australia’s economic signals, as its services PMI showed a slowdown too. Upcoming inflation data in Australia will be crucial; with inflation still above the RBA’s target of 2-3% in recent quarters, any surprising fall could shift their cautious stance. A weak inflation reading could increase the chances of an RBA rate cut, challenging the bullish outlook for AUD/USD. Create your live VT Markets account and start trading now.

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