AUD/USD Rebounds, Though Dollar Remains a Drag

The AUD/USD pair attempted a recovery during Wednesday’s (Nov 11) trading session, following a dip to its lowest level since late March—in the 0.6845–0.6840 range. The pair hovered around 0.6875 during the European session, but gains remained limited as the US dollar stayed strong, bolstered by US inflation data that revealed higher-than-expected price pressures.

Risk-on sentiment provided some support for the Australian dollar, fueled by hopes for diplomatic progress toward ending the conflict between the US and Iran. US Secretary of State Marco Rubio stated that a major military operation against Iran is unnecessary, while President Donald Trump noted positive momentum in the negotiations.

Nevertheless, geopolitical risks persist, with ongoing tensions around the Strait of Hormuz and attacks on oil tankers. This has kept investors cautious, while the US dollar remains near a two-week high, as US inflation figures reinforce expectations for a tighter monetary policy.

Economists at Commerzbank suggest that US inflation remains too high, noting that the decline in price pressures anticipated by the Federal Reserve has yet to materialize. Core inflation also remains elevated, showing no convincing downward trend—a factor that gives the Fed reason to maintain a hawkish stance.

Meanwhile, comments from Fed Governor Christopher Waller have led the market to consider the possibility of a 50-basis-point interest rate hike in December. This contrasts with the increasingly dovish tone from the Reserve Bank of Australia (RBA), which suggests that Australia’s rate-hiking cycle may be nearing its end.

Newsmaker Analysis: The AUD/USD pair retains room for a rebound, provided that risk-on sentiment and hopes for a peaceful resolution between the US and Iran continue to improve. However, the divergence in policy direction between the Fed and the RBA remains a primary obstacle. As long as expectations for US interest rate hikes remain firm, any upside for the AUD/USD is likely to stay limited. (srh)

Source: Newsmaker.id