• AUD/USD softens to near 0.7015 in Thursday’s early Asian session.
• RBA’s Hauser says inflation outlook is materially worse than the bank had forecast, raising prospect of another rate hike as soon as November.
• Fed's next policy path remains a major catalyst.

The AUD/USD pair loses momentum to around 0.7015 during the early Asian trading hours on Thursday. Risk-off bias and safe havens flows provide some support to the US Dollar (USD) against the Australian Dollar (AUD). Traders will keep an eye on the weekly US Initial Jobless Claims data, which is due later on Thursday.

Iranian official threatened to target US political figures if American strikes resume, according to Fars News. This marks a significant escalation in warnings from Tehran. Meanwhile, the Saudi-led coalition said early Wednesday that it intercepted and destroyed five drones launched toward Saudi Arabia. Ongoing tensions in the Middle East could boost safe-haven currencies such as the Greenback and act as a headwind for the pair.

On the Aussie, traders raise their bets on a Reserve Bank of Australia (RBA) rate hike after Andrew Hauser’s remarks. RBA monetary policy board member Hauser on Wednesday warned the inflation outlook was “materially worse” in the coming months. He warned the inflation outlook was “materially worse” in the coming months.

The probability of an interest rate increase in the November policy meeting jumped from 30% before Hauser’s comments to 45%, according to the Guardian. If delivered, it would be the fifth rate rise for the year and would leave the Official Cash Rate target (OCR) at 4.85%, from 4.6% now, and at its highest level since the global financial crisis.

RBA hike odds rise as Hausner flags “materially worse” inflation outlook

Analysts at MUFG note that the Australian rate market has shifted “to price in a higher probability of another RBA rate hike before the end of this year” after hawkish remarks from RBA Deputy Governor Andrew Hausner. He warned that the inflation outlook looks “materially worse” than the RBA’s August forecasts, highlighting that “we’re seeing higher AI prices, tech prices feeding through into CPI…and we’re having a boom in data centre construction here in Australia as well, so that’s upside too, and then on domestic capacity pressure”.

MUFG emphasises that Hausner also voiced concern that “inflation has been high for a very long time now, and we are beginning to see some signs that people in the community are not sure if we’re going to bring inflation back to target, or certainly not for an extended period”. In response, the bank notes that these hawkish comments have encouraged market participants to price in “closer to a 50:50 probability of another RBA hike next month”.

Warsh flags investment surge and AI focus while keeping Fed options open

Fed Chair Warsh delivered a moderately constructive but cautious message, with the FXS Speechtracker score of 5.6/10 undershooting the 6.1/10 historical average and signaling slightly softer conviction relative to the established baseline. The admission of being “over-scarred from the Global Financial Crisis” underscores a persistent risk-averse bias, even as Warsh highlights a structural growth and investment surge driven by “good policies” and refuses to pre-commit on October and December decisions. Emphasis on AI as a near-term demand shock and a future support for data confidence suggests the Fed is leaning into technological tailwinds while remaining alert to uncertain labor-market effects and potential financial stability risks.

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to hold at a still-elevated 127.51, consistent with a firmly hawkish stance despite the slightly softer FXS Speechtracker score. The combination of a high index level and non-committal forward guidance implies that markets continue to price a restrictive Fed reaction function, with Warsh’s focus on output, employment, inflation, and tail risks reinforcing a bias toward maintaining tight policy rather than signaling an imminent pivot.

Technical Analysis: AUD/USD remains capped below the 100-day SMA

In the daily chart, AUD/USD hovers just under the 100-day simple moving average (SMA) and the Bollinger upper band, leaving the topside cautiously capped for now, while the Bollinger midline offers nearby support. The Relative Strength Index (14) around 51 hints at mildly positive but non-committal momentum, consistent with a neutral near-term bias as price oscillates around the 0.70 handle.

On the topside, immediate resistance aligns at the 100-day SMA at 0.7035, followed closely by the Bollinger upper band at 0.7035, a tight supply zone that bulls would need to clear to extend gains. On the downside, initial support is seen at the Bollinger middle band around 0.6975, with the lower band near 0.6915 marking a stronger floor if selling pressure resumes.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Australian Dollar FAQs

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.