Aussie Holds Ground Ahead of Expected RBA Cut. Forecast as of 11.08.2025
The Australian dollar quickly recovered after July’s sell-off and is poised to extend its rally, driven by a soaring global risk appetite and the RBA’s measured stance. Let’s discuss this topic and make a trading plan for the AUDUSD pair.
The article covers the following subjects:
Major Takeaways
- The RBA intends to lower the cash rate.
- A hawkish surprise from the RBA cannot be ruled out.
- The S&P 500 rally supports the aussie.
- Long trades on the AUDUSD pair can be considered above 0.6535.
Weekly Fundamental Forecast for Australian Dollar
The Reserve Bank of Australia’s cautious stance and appetite for global risk are undeniable. Against this backdrop, the AUDUSD pair is poised to post significant gains. Standard Chartered Bank confirms that derivatives market traders are capitalizing on the global weakness of the US dollar by strategically buying derivatives on the Australian dollar and the euro. The regional currency has gained traction because investors are convinced that the ECB’s monetary expansion cycle is nearing its end and that Germany’s fiscal stimulus will significantly boost the currency bloc’s economy.
The RBA can afford to take its time. The derivatives market and Bloomberg experts are unanimous: the key rate will be cut by 25 basis points to 3.6% at the August 12 meeting, notching the third act of monetary expansion since the beginning of the year. However, the RBA will likely surprise investors by keeping the cash rate unchanged, as it did at its previous meeting. Natixis asserts that a “hawkish surprise” is a distinct possibility, given the low unemployment rate.
Australia’s Unemployment, CPI, and Wages
Source: Bloomberg.
Inflation sits firmly in the target range of 2–3%, and the labor market is robust. The RBA has no reason to rush. The derivatives market is signaling two acts of monetary expansion in 2025, with a coin flip’s chance of a third. Bloomberg experts predict the cash rate will be trimmed to 3.1% by early 2026, and it is highly unlikely that further monetary easing will be necessary.
The AUDUSD pair is gaining support from high global risk appetite, in addition to the Reserve Bank’s caution. Strong corporate earnings, the US economy’s resilience to tariffs, expectations of a Fed cut, and retail investors’ desire to buy the dips triggered a 30% rally in the S&P 500 index from its April lows.
However, foreign investors are increasingly hedging currency risks associated with US assets, and Australian residents are no exception. The share of pension funds that are hedging risks is 6%, while 28% are not doing so. A surge in the former, paired with a decline in the latter, is poised to boost AUDUSD quotes.
Share of Pension Funds Exposed to Currency Risks
Source: Bloomberg.
The AUDUSD pair is poised to resume its upward trend. The main risk for bulls is a pullback in the S&P 500 index due to US inflation, which is not slowing down. Bloomberg experts anticipate a swift rise in consumer prices, forecasting an increase from 2.7% to 2.8% in July, and a significant surge in core inflation from 2.9% to 3%. If this happens, the derivatives market will reduce the chances of the Fed resuming its monetary expansion cycle, which will support the US dollar.
Weekly AUDUSD Trading Plan
Against this backdrop, stagflation will be inevitable, which is unfavorable for the greenback. This scenario will allow investors to buy the AUDUSD pair after the RBA meeting or at 0.6535.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of AUDUSD in real time mode
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