The Australian dollar (AUD) rose to around $0.656 on Tuesday, its highest level in nearly three weeks. This increase was primarily due to the weakening US dollar (greenback). US market participants await the Fed's decision on Wednesday, and many have already set expectations that the benchmark interest rate will be cut by 25 basis points. Positive sentiment regarding the possibility of a US-China trade deal has also slightly reduced demand for safe-haven assets like the US dollar, giving the AUD more room to move.

Domestically, the Australian market is now awaiting two important data: third-quarter inflation, due out on Wednesday, and the September monthly CPI. These figures will significantly influence views on the future direction of interest rates. If inflation remains high, the RBA could hold rates high for longer. If inflation begins to subside, the chances of further easing become greater.

Interestingly, the chances of an interest rate cut by the Australian central bank have dropped sharply. Currently, the market is pricing the probability at only around 15%, down from around 60% previously. Why the decline? RBA Governor Michele Bullock emphasized that Australia's labor market remains "a little tight," even though unemployment figures rose higher than the RBA's projections. This means the RBA doesn't feel the need to cut interest rates too soon. So, for now, the AUD's $0.656 is driven more by the weakness of the US dollar—not by the RBA becoming dovish. (az)

Source: Newsmaker.id