Aussie Mildly Lower After RBA Hold; Yen Firms On Fresh Verbal Intervention

Australian Dollar traded mildly lower after the RBA left its cash rate unchanged at 3.60%, a move fully expected by markets. The policy hold came with few surprises, and the key takeaway was that the RBA's updated forecasts signal no further rate cuts this year, reflecting a sharper upward revision in near-term inflation. The decision and tone were broadly in line with expectations, explaining the relatively muted market response following the announcement.

Governor Michele Bullock reinforced this message at the post-meeting press conference, saying the Board "did not consider cutting today." She added that while it's "possible there are no more rate cuts, it's possible there are some more". Bullock described the risks as "fairly evenly balanced to the upside and the downside," emphasizing flexibility: "We are not wedded religiously to a particular path." Her remarks suggest the RBA sees inflation risks and growth headwinds as roughly offsetting, with policy firmly on pause until more clarity emerges from upcoming data, particularly the Q4 CPI due January.

Elsewhere in currency markets, Japanese Yen strengthened on renewed verbal intervention from officials Finance Minister Satsuki Katayama issued another sharp warning, saying she was observing "one-sided and rapid moves" in the currency market and that authorities would monitor developments with a "high sense of urgency." The remarks revived speculation that Tokyo could step in to curb excessive Yen weakness if volatility persists.

Katayama's statement effectively overshadowed comments from Prime Minister Sanae Takaichi, who reiterated that Japan has yet to achieve the BoJ's 2% inflation target on a sustained basis alongside wage growth — implying that she favors maintaining loose monetary policy.

In the broader market, Yen is currently the strongest performer of the day, followed by the Dollar and Loonie. Kiwi is the weakest, trailed by Swiss Franc and Sterling. Aussie and Euro trade in the middle of the pack.

In Asia, at the time of writing, Nikkei is down -0.72%. Hong Kong HSI is down -0.20%. China Shanghai SSE is down -0.39%. Singapore Strait Times is down -0.21%. Japan 10-year JGB yield is up 0.02 at 1.679. Overnight, DOW fell -0.48%. S&P 500 rose 0.17%. NASDAQ rose 0.46%. 10-year yield rose 0.005 to 4.106.

RBA holds at 3.60%, upgrades inflation path, sees only one cut in 2026

The RBA kept the cash rate unchanged at 3.60%, a move widely expected by markets and decided unanimously by the Board. In the statement, policymakers said the decision reflected a balance between inflation risks and economic resilience, noting that Q3 CPI was "materially higher" than expected and that there was "recent evidence of more persistent inflation." Together with signs of recovering private demand and a labor market that remains "a little tight," the Bank judged that current settings remain appropriate.

The updated economic projections painted a picture of stickier inflation but slightly better near-term growth. Average GDP growth for 2025 was upgraded from 1.6% to 1.8%, while the 2026 projection was trimmed from 2.1% to 1.9%, and 2027 was kept unchanged at 2.0%.

Headline inflation forecasts were lifted across the board — from 3.0% to 3.3% for the end of 2025, 2.9% to 3.2% for 2026, and 2.5% to 2.6% for 2027 — reflecting persistent price pressures in both goods and services.

Underlying inflation was also revised higher. The trimmed mean CPI forecast jumped from 2.6% to 3.2% by the end of 2025, while the 2026 estimate edged up from 2.6% to 2.7%, and 2027 from 2.5% to 2.6%.

These upward revisions highlight the Bank's view that inflation will take longer to return sustainably to target.

Meanwhile, policy-rate assumptions in the central scenario indicate no further rate cuts in 2025, followed by just over one reduction next year, lowering the cash rate to around 3.3% by the end of 2026, where it is expected to remain through 2027.

Japan's PMI manufacturing finalized at 48.2, but sentiment shows improvement

Japan's manufacturing sector contracted again in October, with the final S&P Global PMI edging down to 48.2 from 48.5 in September. According to S&P Global's Pollyanna De Lima, demand softness — particularly in the automotive and semiconductor sectors — triggered the sharpest fall in new orders since early 2024, while exports to Asia, Europe, and the U.S. continued to decline.

Manufacturers also faced rising cost pressures, as higher input costs squeezed margins even as demand waned. To offset these pressures, many firms lifted selling prices despite intense competition for new business.

Still, sentiment showed some improvement. The decline in production was relatively contained, and many firms expressed greater optimism about future output. Hopes for successful new product launches and expectations that the impact of U.S. tariffs will eventually fade helped boost confidence.

Fed's Cook: Every meeting is live, December included

Fed Governor Lisa Cook said she supported last week's quarter-point rate cut, describing it as "another gradual step toward normalization." Cook noted that she views current policy as "modestly restrictive," which remains appropriate given that inflation is still above target. At the same time, she argued that "downside risks to employment are greater than the upside risks to inflation," suggesting a tilt toward caution on the growth side of the Fed's dual mandate.

Cook emphasized that monetary policy is "not on a predetermined path". She said the economy is at a moment when risks to both sides of the mandate are elevated: keeping rates too high could cause a sharp labor-market deterioration, while cutting too aggressively could risk unanchoring inflation expectations. .

Looking ahead, Cook stressed that each meeting remains a "live meeting," including December's. She will base her decision on incoming data and shifts in the economic outlook, particularly regarding labor conditions and inflation persistence.

Fed's Daly keeps open mind on December, sees labor market still stable

San Francisco Fed President Mary Daly said she supported last week's rate cut and will approach the December meeting with "an open mind". She believed it was "appropriate to take another bit off the policy rate," while emphasizing that the central bank must now gauge whether the 50 basis points of easing delivered this year are sufficient to guard against further weakness in hiring.

She noted that incoming data, including state-level jobless claims, suggest the labor market is not on a "precipice," with conditions still stable despite slower momentum. Inflation, she said, is running near 3%, indicating progress but not yet a full return to target.

Daly added that FOMC participants often hold diverse views ahead of meetings, but consensus tends to emerge as new data clarify the outlook.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6532; (P) 0.6546; (R1) 0.6559; 

AUD/USD's break of 0.6524 resistance turned support suggests that rebound from 0.6439 has completed at 0.6616. Intraday bias is back on the downside for deeper fall to 0.6349, or even further to 0.6413 cluster support (38.2% retracement of 0.5913 to 0.6706 at 0.6403). Strong support should be seen from 0.6403/13 to bring rebound to extend range trading. However, sustained trading below there will carry larger bearish implications.

In the bigger picture, there is no clear sign that down trend from 0.8006 (2021 high) has completed. Rebound from 0.5913 is seen as a corrective move. Outlook will remain bearish as long as 38.2% retracement of 0.8006 to 0.5913 at 0.6713 holds. Break of 0.6413 support will suggest rejection by 0.6713 and solidify this bearish case. Nevertheless, considering bullish convergence condition in W MACD, sustained break of 0.6713 will be a strong sign of bullish trend reversal, and pave the way to 0.6941 structural resistance for confirmation.

Source: ACTIONFOREX