FX.co ★ Australian Dollar Extends Decline

The Australian dollar fell to approximately $0.647 on Friday, continuing its decline from the previous day as speculation grows regarding a potential short-term rate reduction by the Reserve Bank of Australia (RBA). Current futures indicate an 85% probability of a 25 basis point cut by the RBA to 3.35% on November 4, an increase from a 50% likelihood earlier in the week. A further decrease to 3.10% is also fully expected. This market prediction follows an unexpected rise in unemployment and a lesser number of jobs created, suggesting a softening labor market. Nonetheless, analysts advise that the central bank will likely await the Q3 Consumer Price Index (CPI) report before making any rate decisions. Concurrently, investors are assessing the risks tied to escalating US-China trade tensions. In recent developments, China has accused the US of overstating its rare earth export restrictions, labeling the ensuing "panic" as unnecessary while indicating willingness to engage in trade negotiations. Additionally, ongoing weakness in the US dollar—stemming from trade disputes, the government shutdown, and a decelerating US economy—has provided some support to the Australian dollar.