RBA vs. the Fed: the aussie has a chance to rise

AUD/USD

Key zone: 0.7000 - 0.7050

Buy: 0.7050 (on strong positive fundamentals) ; target 0.7150-0.7200; StopLoss 0.7000

Sell: 0.6950 (on a confident break of 0.7000) ; target 0.6800; StopLoss 0.7000

An RBA rate hike to 4.85% could support the Australian dollar, especially against the backdrop of a different path for U.S. monetary policy. The yield differential favors the AUD, but the currency's outlook will depend on more than the regulator's decision: weak demand in China and deteriorating global risk appetite could quickly offset this effect.

At the beginning of November, the Australian dollar has significant domestic support — accelerating inflation, which continues to put pressure on the Reserve Bank of Australia. However, the expected rate hike on November 3 is already largely priced into market quotes, so the announcement alone may not be enough for sustained AUD appreciation.

A reminder:

The current interest rate is 4.60%. If the regulator raises it by 25 basis points, the rate will reach 4.85%. This will be the fifth monetary policy tightening in 2026.

The latest data from the Australian Bureau of Statistics confirm persistent inflationary pressure:

• Annual inflation rose to 4.3% in September, following 4.0% in August.
• Trimmed mean inflation, excluding the most volatile components, stood at 3.6%.
• The quarterly core inflation measure reached 3.7% year over year.

All three figures exceed the RBA's 2–3% target range. At the same time, the scope for further tightening is limited by economic conditions: unemployment rose to 4.7% in September, its highest level in five years, consumer activity is slowing, and housing prices are falling.

The RBA continues to raise rates, while the Fed is keeping its rate unchanged for now, without ruling out further tightening. If the Australian regulator raises its rate to 4.85% on November 3, the differential relative to the upper bound of the Fed's target range will increase from 60 to 85 basis points.

This divergence could support the AUD through several channels:

• The relative yield on Australian assets will increase.
• The Australian dollar will become more attractive for carry trade strategies.
• The market may revise expectations for the future path of interest rates and forward exchange rates.

However, higher yields do not automatically mean currency appreciation. If U.S. inflation accelerates and Treasury yields continue to rise, the dollar could retain its advantage due to demand for liquidity and safe-haven assets.

China remains the key external risk for the Australian currency, as it is the main destination for Australia's commodity exports. Demand for iron ore, coal, and liquefied natural gas (LNG) has the most direct impact on the AUD. Copper is important primarily as an indicator of global industrial activity, electrification, and the investment cycle, rather than as the main driver of the Australian dollar.

The most direct channels of influence on the AUD are associated with iron ore, coal, and liquefied natural gas (LNG). Copper serves primarily as an indicator of global industrial demand, electrification, and the investment cycle, rather than as the main export driver of the Australian currency.

Further developments could follow two scenarios.

• Recovery in Chinese demand. Improving PMI, rising infrastructure investment, and stabilization of the construction sector will support industrial metals and the AUD. If this coincides with RBA tightening, the currency will have a basis for more sustained growth.
• Continued industrial downturn. Weak new orders, declining construction activity, and reduced commodity imports will increase pressure on copper and iron ore. In this case, even a high interest rate in Australia does not guarantee AUD appreciation.

For copper trading, the RBA's decision is of secondary importance. It is far more important to monitor Chinese physical premiums, LME and SHFE inventories, trends in copper concentrate imports, and global supply conditions.

When the rate decision is announced, it is reasonable to wait for the market's initial reaction and the RBA press conference. This will make it possible to assess whether the regulator confirms expectations of further tightening and whether momentum persists after the initial move.

And What Was the Result?

Chinese demand could limit the Australian dollar's upside potential. If the industrial slowdown in China continues, AUD appreciation risks being short-lived regardless of the RBA's decision.

Therefore, a position based on Australian dollar appreciation should be linked not to a single rate hike, but to a combination of three factors: Australia's continued interest rate advantage, resilient global risk appetite, and stabilization of Chinese commodity demand. Until these conditions are confirmed, the probability of a false upward move after the meeting remains high.

So we act wisely and avoid unnecessary risks.

Profits to y’all!