• The AUD weakens as the USD regains momentum and Fed rate-cut expectations fade.
• Markets assign only a 6% probability to an RBA rate cut in December.
• The Greenback strengthens ahead of delayed US economic data releases.

AUD/USD trades around 0.6510 on Monday at the time of writing, down 0.40% on the day. The Australian Dollar (AUD) declines against the US Dollar (USD), paring part of last week’s gains as investors rapidly adjust expectations regarding the trajectory of Federal Reserve (Fed) policy. The US Dollar recovers as several Fed officials reiterate that the current policy stance remains “restrictive,” reducing the likelihood of an interest rate cut at the December meeting.

In Australia, support for the Aussie is fading from last week’s strong labor-market figures. According to the Australian Bureau of Statistics, the Unemployment Rate fell to 4.3% in October, while Employment Change rose 42.2K, driven by a significant increase in full-time positions. This reinforced the view that the Reserve Bank of Australia (RBA) will maintain a cautious stance. ASX 30-Day Interbank Cash Rate Futures for December 2025 imply only a 6% chance of a rate cut from 3.60% to 3.35%, according to ASX's RBA Rate Tracker.

The AUD turns cautious as the RBA will release the minutes of its November meeting on Tuesday, after the central bank kept rates unchanged at 3.6%, arguing that inflation remains too high. Deputy Governor Andrew Hauser recently reiterated that policy is still “mildly restrictive,” highlighting ongoing internal debate over the appropriate stance.

In the United States (US), traders are preparing for a backlog of data delayed by the end of the government shutdown. The September Nonfarm Payrolls (NFP) report is scheduled for November 20, but several indicators remain uncertain as many agencies were unable to collect October data. Kevin Hassett, Director of the US National Economic Council, warned that some October figures may “never be produced.”

The Dollar also finds support from recent Fed remarks. Kansas City Fed President Jeffery Schmid argued that policy should “lean against demand growth,” calling the current stance “modestly restrictive.” St. Louis Fed President Alberto Musalem said rates are now closer to neutral but stressed the risk of easing too early. Minneapolis Fed President Neel Kashkari noted signs of strain in parts of the labor market and inflation still too high at 3%.

These comments have pushed markets to scale back easing expectations. According to the CME FedWatch tool, the chance of a 25-basis-point cut in December has fallen to 46%, from 67% a week earlier.

The stronger-than-expected New York Empire State Manufacturing Index, released earlier in the day at 18.7 for November versus 6 expected and 10.7 previously, further underscores US economic resilience.