Navigating the Storm: AUDʼs Journey Through Cuts, Spikes, and Cross-Currency Moves

The Australian Dollar faced sustained downward pressure throughout August as the Reserve Bank of Australia (RBA) continued its easing cycle. The central bank cut the cash rate by 25 basis points to 3.60%, marking its third reduction this year, and signalled that further cuts remain on the table. This move reflected a softer inflation outlook and signs of moderation in the labour market, reinforcing expectations that monetary policy will stay accommodative well into 2026.

Adding complexity to the outlook, inflation unexpectedly accelerated in July. Consumer Price Index

(CPI) rose 2.8% year-on-year, up from 1.9% in June and well above the 2.3% forecast by economists. Underlying inflation, measured by the trimmed mean, also climbed to 2.7% from 2.1%. This resurgence was driven by higher housing and food costs, as well as the unwinding of electricity rebates, which the RBA has warned will contribute to volatility in price growth over the second half of 2025. The surprise uptick challenges expectations of a smooth disinflation path and could temper the pace of future rate cuts.

External factors added further volatility, particularly geopolitical developments and trade dynamics. Heightened global uncertainty from tariff threats and shifting U.S. policy expectations dampened risk appetite, a key driver for the AUD. At the same time, Australia’s trade relationship with China showed renewed strength, with two-way trade rebounding and discussions to expand cooperation into sectors like green energy and technology. While this offers long-term support, near-term pressures from monetary policy and global risk sentiment remain dominant forces shaping the currency’s trajectory.

AUD/USD

In August, AUD/USD traded within a volatile range as shifting monetary policy expectations and global risk sentiment drove sharp moves. The pair initially weakened to a two-week low near 0.6415 amid U.S. dollar strength and caution ahead of the Jackson Hole Symposium, before rebounding on dovish signals from the Federal Reserve that fuelled hopes of a September rate cut. This recovery formed a bullish double-bottom pattern, lifting the pair back toward 0.65+, though gains were capped by persistent resistance near 0.6568. By month-end, AUD/USD remained in consolidation, with traders watching key support at 0.6498 and next major resistance at 0.6625 for signs of a breakout.

AUD/GBP

The AUD also traded under pressure against the GBP through the month, weighed down by the RBAʼs dovish stance and global risk aversion. Despite a modest rebound in domestic data, including stronger PMI and consumer confidence, the currency struggled to gain traction as the RBAʼs latest rate cut and guidance for potential further easing kept sentiment subdued. Meanwhile, GBP found support from firmer UK inflation and PMI readings, offsetting early-month concerns over fiscal policy risks. As a result, AUD/GBP held within a narrow range above £0.48, with technical signals pointing to a bearish bias in the short term, even as longer-term forecasts suggest a gradual recovery toward 0.49+ by yearend.

AUD/EUR

The AUD traded in a relatively tight range against the Euro during August, reflecting a balance between domestic monetary policy expectations and external economic factors. The pair hovered near 0.556– 0.559 in August, slightly below its three-month average, as the RBAʼs recent rate cut and guidance for potential further easing weighed on sentiment. However, AUD/EUR shows signs of recovery after the unexpected CPI data on Wednesday (27/08), currently hovering around 0.559-0.5608. Meanwhile, the Euro found modest support from stronger Eurozone manufacturing data, though lingering concerns over energy supply and geopolitical risks capped gains. Forecasts remain cautiously optimistic for the AUD, with projections suggesting a move toward 0.567 by mid-September, supported by improving commodity prices and hopes of Chinese stimulus. However, technical indicators showed mixed signals, with repeated EMA crossovers and MACD pointing to negative momentum, highlighting the risk of short-term volatility despite a broadly bullish medium-term outlook.

AUD/NZD

The AUD outperformed the NZD in August, breaking above the key 1.10 level for the first time since early March as policy divergence widened. While the RBA delivered a measured 25 bps cut and signalled caution, the Reserve Bank of New Zealand (RBNZ) adopted a far more dovish stance, slashing its Official Cash Rate to 3.00% and projecting further easing into 2026. This contrast fuelled strong bullish momentum for AUD/NZD, which climbed from mid-month levels near 1.099 to around 1.11 by month-end, supported by a golden cross on technical charts and forecasts pointing to further upside toward 1.1180 if momentum persists.

Key Events in the Upcoming Month

United States

• Aug 29: Core PCE Price Index (Fedʼs preferred inflation gauge), Preliminary GDP (Q2), Chicago PMI
• Sep 6: Non-Farm Payrolls and Unemployment Rate (August)
• Sep 18: FOMC Meeting – Interest rate decision and updated economic projections
• Sep 15: Industrial Output and Fixed Asset Investment

Eurozone & UK

• Aug 28-29: German Prelim CPI, Spanish Flash CPI
• Sep 5: Eurozone retail sales
• Sep 12: EBC Policy meeting
• UK Sep 18:CPI, Monthly GDP updates

Australia

• Sep 3: Australian GPD (Q2)
• Sep 18:Australian employment record
• Sep 24:RBA meeting minutes

China

• Sep 15: Industrial Output and Fixed Asset Investment

Overall, August highlighted the AUDʼs sensitivity to both domestic policy shifts and global market dynamics. While the RBAʼs continued easing cycle and surprise inflation resurgence created a complex backdrop, external factors such as geopolitical uncertainty and trade developments added further layers of volatility. Looking ahead, the currency’s trajectory will hinge on how quickly inflation stabilizes, the pace of future RBA adjustments, and the interplay of global risk sentiment; factors that will remain critical in shaping AUD performance across major and regional pairs in the months to come.

-Corry Naftali, Senior Account Manager