Australian Dollar Slumps 0.88% Amid Strengthening Hawkish Signals from the Fed

The Australian dollar weakened sharply against the US dollar during trading on Tuesday (November 10, 2026), following a US inflation report that showed a larger-than-expected increase. The AUD/USD pair fell by 0.88%, breaking through the psychological level of 0.6900, reflecting mounting selling pressure on the Australian currency. This decline occurred as investors began to anticipate that the Federal Reserve (the Fed) might raise interest rates again in December—potentially through an even more aggressive move. The strengthening of the US dollar, driven by growing expectations for monetary tightening, has been the primary factor weighing on the Australian dollar.

US Consumer Price Index (CPI) data for October showed that headline inflation rose by 0.4% month-on-month; while this represents a slowdown from the 0.6% increase seen in September, it still exceeded the 0.3% forecast. Meanwhile, core CPI—which excludes food and energy components—rose by 0.3% from the previous month, surpassing the 0.2% estimate and matching the figure from September. These conditions indicate that price pressures outside of the energy and food sectors remain persistent, fueling concerns that the disinflation process is unfolding more slowly than anticipated. These results reinforce the view that the Fed may need to maintain a tight monetary policy to keep price increases in check.

Expectations for monetary tightening have intensified following hawkish remarks from several Fed officials. Fed Governor Christopher Waller recently suggested that a 0.3% rise in core inflation could provide grounds to consider a 50-basis-point interest rate hike in December. Meanwhile, Fed Governor Michelle Bowman noted that persistently high inflation, combined with a robust labor market, underscores the continued need for measures to control prices. Dallas Fed President Lorie Logan has also raised the possibility of an accelerated pace of interest rate hikes. According to market probabilities reflected in the CME FedWatch Tool—as cited in the report—a 25-basis-point rate hike has already been fully priced in, while the likelihood of a 50-basis-point increase stands at approximately 10%.

In Australia, pressure on the Australian dollar has intensified following data showing a significant decline in consumer confidence. The Westpac-Melbourne Institute consumer sentiment index fell by 2.7% to 78.2 in November, reaching its lowest level in four years. This decline reflects public concern regarding economic conditions and purchasing power, following a series of interest rate hikes by the Reserve Bank of Australia (RBA) throughout the year. Higher borrowing costs are likely to constrain household spending and domestic economic activity. The combination of weakening Australian consumer confidence and rising expectations for U.S. interest rates leaves the AUD/USD pair increasingly vulnerable to selling pressure.