The Australian dollar (AUD) steadied against the US dollar (USD) on Friday following the release of the preliminary S&P Global Purchasing Managers Index (PMI) data. Market participants now turn their attention to next week’s quarterly inflation figures, which could play a pivotal role in shaping the Reserve Bank of Australia’s (RBA) policy outlook.
Australia’s preliminary S&P Global Manufacturing PMI slipped to 49.7 in October from 51.4 previously, signaling contraction in the sector. In contrast, the Services PMI improved to 53.1 from 52.4, while the Composite PMI edged higher to 52.6, reflecting modest growth in overall business activity.
RBA Governor Michele Bullock, speaking at an event in Sydney, refrained from commenting on monetary policy or the broader economic outlook. Bullock noted that beginning next year, the central bank will explore ways to modernize the interbank settlement system, which processes approximately A$300 billion (US$194.9 billion) in daily transactions and serves as a cornerstone of Australia’s payments infrastructure, according to Reuters.
The Australian dollar remains vulnerable as speculation intensifies around a potential near-term rate cut by the RBA. The latest employment data added to the dovish sentiment, showing Australia’s jobless rate rising to its highest level in nearly four years in September. This unexpected uptick prompted markets to boost the probability of a 25-basis-point rate cut to 74%, up sharply from around 50% just two weeks earlier.
Geopolitical developments add to market uncertainty
The White House confirmed on Thursday that US President Donald Trump will meet Chinese President Xi Jinping next week, coinciding with another round of high-level trade discussions during the ASEAN Summit. Any shift in China’s economic trajectory could have ripple effects on the Australian dollar, given Australia’s strong trade dependence on China.
US dollar strengthens ahead of key inflation data
The US Dollar Index (DXY), which tracks the greenback against six major peers, gained momentum to trade near 99.00 at the time of writing. Investors are treading carefully ahead of the upcoming US Consumer Price Index (CPI) report, due Friday, amid the ongoing government shutdown that continues to delay major economic releases.
The greenback drew further support after President Trump said he expects to reach “several agreements” with President Xi during their meeting in South Korea next week. The talks are expected to cover a range of topics, including US soybean exports, nuclear disarmament, and China’s purchases of Russian oil.
However, prolonged government gridlock threatens to cloud the economic outlook. The shutdown—now in its 24th day and the second-longest in US history—has delayed critical releases such as Nonfarm Payrolls (NFP), creating uncertainty for both markets and the Federal Reserve (Fed).
A Reuters poll found that 115 of 117 economists expect the Fed to cut rates by 25 basis points, bringing the target range to 3.75%-4.00% at its October 29 meeting. For the full year, 83 economists anticipate two rate cuts, while 32 expect one. According to the CME FedWatch Tool, markets are now pricing in a 98% chance of a Fed rate cut in October and a 92% chance of another in December.
In China, the People’s Bank of China (PBOC) kept its one-year and five-year Loan Prime Rates (LPRs) unchanged at 3.00% and 3.50%, respectively.
Meanwhile, in a significant bilateral development, President Trump and Australian Prime Minister Anthony Albanese signed an US$8.5 billion critical minerals agreement at the White House. The deal aims to secure access to Australia’s abundant rare-earth resources amid China’s tighter export controls. Both nations pledged to invest at least US$1 billion each in new mining and processing projects over the next six months.
AUD/USD technical outlook: downside bias remains
The AUD/USD pair was last seen trading around 0.6510 on Friday. Technical indicators suggest a continued bearish bias, with the pair remaining within a descending channel on the daily chart. The 14-day RSI sits below 50, reinforcing the negative momentum.
On the downside, immediate support lies near the four-month low of 0.6414, followed by the lower boundary of the descending channel at 0.6390. A break below this key zone could open the door for a retest of the five-month low at 0.6372.
Conversely, a sustained move above the nine-day Exponential Moving Average (EMA) at 0.6508 could improve short-term sentiment, paving the way for a test of the 50-day EMA at 0.6541, which aligns with the upper boundary of the descending channel.
