AUD/USD holds steady as Australian inflation persists, US Dollar weakens

• The Australian Dollar remains firm as hotter inflation continues to push back expectations of rapid RBA easing.
• Australian private sector credit beats forecasts, reinforcing the prospect of a vigilant Reserve Bank of Australia.
• The US Dollar stays under pressure as markets price in additional Federal Reserve rate cuts in the coming years.

AUD/USD trades around 0.6535 on Friday at the time of writing, virtually unchanged on the day. Despite several attempts to extend its recent rebound, the Australian Dollar (AUD) struggles to maintain upward momentum, even as stronger-than-expected inflation continues to delay expectations of Reserve Bank of Australia (RBA) easing and revives the risk of another rate hike.

The AUD benefited earlier in the week from hotter inflation data showing consumer prices rising for a fourth consecutive month and now sitting above the RBA’s 2%-3% target band. Markets still expect the central bank to leave the Official Cash Rate (OCR) unchanged at 3.6% in December, but the risk of additional tightening remains elevated given persistent price pressures. RBA officials stress that, while the labor market is moderating slightly, it remains fundamentally solid, keeping upward pressure on inflation.

The cautious policy tone is reinforced by Friday’s data. According to the Reserve Bank of Australia, Private Sector Credit rose 0.7% MoM in October, beating expectations of 0.6% and lifting annual growth to 7.3%, signaling still-resilient domestic demand.

At the same time, AUD/USD draws moderate support from a softer US Dollar (USD). The Greenback lacks clear direction as markets increasingly price in Federal Reserve (Fed) rate cuts starting in December. Traders now anticipate three additional rate reductions by 2026, following reports that Kevin Hassett, the White House National Economic Council Director, is the leading candidate for the next Fed chair, a profile seen as aligned with US President Donald Trump’s preference for lower interest rates.

Against this backdrop, AUD/USD remains driven by a delicate balance between Australia’s resilient economic momentum, persistent inflation, and mounting expectations of US monetary easing. For now, the pair holds steady around 0.6535, as markets wait for the next signals from both the Fed and the RBA.