AUD/USD is currently at about 0.6590, up 0.50% today. The pair is benefiting from a weaker US Dollar, influenced by possible changes at the Federal Reserve and signs of a slowing US economy.

Speculation on Federal Reserve Changes

There is speculation that Kevin Hassett may replace Jerome Powell as Fed Chair, which puts pressure on the US Dollar. Hassett favors lower interest rates, suggesting a dovish Fed and further impacting the currency’s performance. Recent US data continues this negative trend for the US Dollar. The ISM Services PMI shows growth in service activity but a slowdown in new orders and an ongoing decrease in employment. The S&P Global US Services PMI also indicates weakened activity, while the ADP Employment Change report reveals a loss of 32,000 jobs in November. In Australia, the AUD remains steady despite third-quarter GDP growth being lower than expected at 0.4%, instead of the forecasted 0.7%. Supportive comments from the Reserve Bank of Australia boost the currency, with Governor Michele Bullock hinting at possible rate hikes if inflation stays high. The focus is now on Australia’s upcoming Trade Balance data and the US PCE report on Friday. These reports are important ahead of the Federal Reserve’s monetary policy meeting.

Market Predictions and Strategies

The market anticipates significant weakness in the US Dollar leading up to next week’s Federal Reserve meeting. This expectation is fueled by speculation of a dovish Fed chair and recent weak data, like job losses reported by ADP in November. The consensus expects Friday’s Non-Farm Payrolls report to show only 50,000 job gains, indicating a sharp slowdown from the average of 150,000 jobs in the third quarter of 2025. This environment makes buying put options on the US Dollar Index an appealing strategy to bet on further declines. Core PCE inflation, the Fed’s preferred measure, cooled to 2.8% in October. If Friday’s reading is also soft, it could strengthen expectations for a rate cut. We’re looking at options that expire in late December or January to fully capture the effects of the Fed’s decision and any follow-up comments. The Australian Dollar is strong, supported by the Reserve Bank of Australia’s firm position. Governor Bullock’s hawkish comments align with Australia’s latest quarterly CPI reading of 3.9%, which remains above the central bank’s target. This difference in policy is a key reason for the strength of the Aussie, even though the RBA has kept its cash rate at 4.60% for the past two meetings. For the AUD/USD pair, we see value in buying call options to gain upside exposure while managing risk from upcoming US data releases. This situation resembles the policy changes we saw in early 2020, where distinct central bank strategies led to consistent currency trends. A strike price around 0.6650 could provide a good risk-reward balance for traders anticipating further upward movement in the coming weeks. Create your live VT Markets account and start trading now.

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