The Australian Dollar has slightly risen against the US Dollar. This is largely due to expectations that the Reserve Bank of Australia (RBA) will keep its tight policy. Markets are also looking forward to Australia’s October employment report, which is expected to show 20,000 new jobs after 14,900 were added in September.

Inflation in Australia

The AUD/USD exchange rate is nearing 0.6530 as demand increases before Thursday’s job report. Australia’s inflation rate surged to 1.3% in the third quarter, up from 0.7% in the previous quarter. This has led the RBA to maintain strict policies to control inflation. RBA Deputy Governor Hauser mentioned that the economy is running above its potential, which limits the possibility of immediate interest rate cuts. In contrast, the US Dollar is weakening. There are expectations for the Federal Reserve to cut rates as soon as December. The US Dollar Index is close to a weekly low of 99.30, and there is a 68% chance of a 25-basis-point rate cut, according to the CME FedWatch tool. Economic uncertainty from delayed US data, due to a budget standoff in Washington, weighs on the US Dollar. This uncertainty helps the AUD/USD pair. The Australian Dollar is also performing strongly against the Japanese Yen among major currencies. Given the current difference between the RBA’s tough stance and the Federal Reserve’s softer approach, we can expect continued strength in the AUD/USD. The outlook is clear: Australian interest rates are likely to stay high, while US markets are already factoring in rate cuts. This difference creates a favorable situation for the Australian Dollar to strengthen against the US Dollar. The case for this view is backed by recent data showing that Australia’s monthly CPI for October 2025 has risen to 4.1% year-over-year, adding pressure on the RBA. With expectations for a strong jobs report tomorrow, buying AUD/USD call options that expire soon seems like a smart move. This strategy allows us to seize potential upside from positive surprises while keeping our downside risk limited to the premium we pay.

Weakness of the US Dollar

We saw a similar trend in the last quarter of 2023 when AUD/USD climbed from about 0.63 to over 0.68. During that time, the market began to anticipate Fed rate cuts while the RBA stayed firm. This historical pattern suggests that the move from 0.6530 might have considerable potential for growth. Therefore, it makes sense to consider positions that could profit from a rise toward the 0.6700 level. In the US, the weakness of the dollar is becoming more pronounced. Last week, initial jobless claims rose to 245,000, confirming a cooling labor market. This has pushed the likelihood of a December Fed rate cut to over 80% on the CME FedWatch tool. Continued indications of a slowing US economy will likely pose a consistent challenge for the US Dollar Index. For those seeking a more defined risk approach, a bull call spread on AUD/USD may be a good option. By buying a call option with a strike price slightly above the current level, like 0.6550, and selling a call with a higher strike at 0.6700, we can lower our initial trade cost. This strategy offers strong potential returns if the AUD/USD pair continues to rise, fitting well with the current economic outlook. Create your live VT Markets account and start trading now.

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