The Australian dollar remained relatively stable, hovering around US$0.70 during Tuesday’s trading session (October 27, 2026)—staying close to its highest level in four weeks. The currency’s strength continues to be supported by expectations that the Reserve Bank of Australia (RBA) may raise interest rates again to curb inflation. Market participants are now awaiting the third-quarter Consumer Price Index (CPI) report, scheduled for release on Wednesday (October 28), which will serve as a key indicator for the future direction of monetary policy.
Australia’s core inflation for the third quarter is expected to rise by approximately 1.0% quarter-on-quarter, while the annual rate is projected to remain around 3.6%. These figures exceed the RBA’s inflation target range of 2%–3%, fueling concerns that price pressures have yet to be fully contained. This presents a challenge for the central bank, which has already hiked interest rates four times this year but continues to face risks stemming from rising energy prices and production costs.
Investors are also focused on RBA Governor Michele Bullock and other senior officials, who are scheduled to testify before parliament around the same time the inflation data is released. The market will be closely monitoring their views on consumer price trends and the potential for further policy tightening. Hawkish remarks could strengthen the Australian dollar, especially if the CPI data reveals higher-than-expected inflationary pressure.
Currently, the market is pricing in a roughly 66% probability that the RBA will raise interest rates by 25 basis points to 4.85% at its upcoming meeting on November 3. Should this occur, it would mark the fifth rate hike of 2026 and potentially signal the peak of the monetary tightening cycle. However, uncertainty remains quite high, as rising borrowing costs also carry the risk of slowing down household consumption and economic activity in Australia.
Looking ahead, the trajectory of the Australian dollar will largely depend on third-quarter inflation data and the divergence in monetary policy between the Reserve Bank of Australia (RBA) and the U.S. Federal Reserve (the Fed). If Australian inflation comes in higher than expected and the RBA signals further interest rate hikes, the AUD/USD pair could see continued gains. Conversely, lower-than-expected inflation data or a strengthening U.S. dollar—driven by a hawkish stance from the Fed—could cap the Australian dollar's upside. With the AUD/USD pair hovering around US$0.70, the decisions made by the RBA and the Fed are likely to determine the direction of the Australian currency in the coming weeks.