The Australian Dollar (AUD) is weakening against the US Dollar (USD). The AUD/USD pair is trading around 0.6530, down by 0.25% today. This drop follows support for the US Dollar after the Federal Reserve’s recent meeting, even though US manufacturing data released earlier today was weaker than expected. The US Institute for Supply Management reported that the Manufacturing Purchasing Managers’ Index (PMI) fell to 48.7 in October, down from 49.1 in September and below the expected 49.5. While there were some improvements in New Orders and Employment, the Prices Paid Index dropped to 58, which helps ease cost pressures.

Market Expectations Shift

Despite the disappointing data, the US Dollar Index (DXY) remains slightly higher. Market expectations about future rate cuts have changed, with a 68% chance of a rate cut in December, down from over 90% just a week ago, according to the CME FedWatch tool. As we approach the Reserve Bank of Australia’s meeting, traders expect the Official Cash Rate to stay at 3.6%. The third-quarter inflation data exceeded predictions, but RBA Governor Michele Bullock notes that the labor market remains tight. At the same time, tensions between the US and China and China’s manufacturing slowdown are affecting regional sentiment. The Aussie dollar is under pressure, trading close to 0.6530 as we head into the RBA meeting. The US dollar is gaining ground after last week’s Fed meeting, creating a challenging environment. This situation suggests that volatility may be the main focus in the coming weeks. The US ISM Manufacturing PMI fell to 48.7, which normally weakens the dollar. However, the most recent US Non-Farm Payrolls report from Friday, November 1st, 2025, shows that the labor market is still strong. This is causing the market to reduce bets on a December Fed rate cut. The tension between slowing manufacturing and a robust job market is keeping derivative markets on alert.

Uncertainty in the Market

Everyone is closely watching tomorrow’s RBA meeting, with the market expecting no change. Remember, the Q3 CPI data from October showed inflation rising at a quarterly rate of 1.2%, which was higher than forecasts and puts pressure on the RBA. This stubborn inflation, despite three rate cuts earlier in 2025, makes a hawkish pause likely. China’s slowing economy continues to weigh on the Aussie. Its manufacturing PMI barely remains in expansion at 50.6. This weakness, along with ongoing concerns about its property sector, limits any significant increase in Australian exports and the dollar. Past experiences, like the slowdown from 2022 to 2023, showed how sensitive the AUD is to Chinese data. Given the uncertainty, trading options may be more effective than taking direct positions in the spot market. Implied volatility is likely to rise before the RBA decision and the Fed’s December meeting, making strategies that benefit from price fluctuations useful. For those expecting a further decline in AUD/USD, buying puts provides a defined-risk way to position for a move below the 0.6500 level. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now