AUD/USD falls as RBA maintains rate pause, US Dollar strengthens

• The Australian Dollar weakens after the RBA leaves its policy rate unchanged at 3.6%.
• RBA Governor Michele Bullock signals policy stability as inflation remains persistent.
• The US Dollar strengthens as markets scale back expectations of further Fed rate cuts.

AUD/USD falls on Tuesday, trading around 0.6500 at the time of writing, down 0.60% on the day. The Australian Dollar (AUD) extends losses after the Reserve Bank of Australia (RBA) decided to keep its Official Cash Rate (OCR) steady at 3.6%, as widely expected by markets.

The RBA justified its pause by citing still-elevated inflation despite signs of softening domestic demand. Data released last week showed that the Consumer Price Index (CPI) rose by 1.3% in the third quarter, beating estimates of 1.1%.

During her press conference, RBA Governor Michele Bullock said that core inflation above 3% was "not ideal," though she viewed current policy as "close to neutral." Bullock refrained from offering guidance on when and by how much the central bank might resume easing, emphasizing the high degree of uncertainty surrounding inflation dynamics.

At the same time, the US Dollar (USD) strengthens, supported by reduced expectations of additional interest rate cuts from the Federal Reserve (Fed) this year. The US Dollar Index (DXY) hovers near a three-month high around 100.00, reflecting stronger confidence in the Greenback.

Recent remarks from Fed officials, including Lisa Cook and Austan Goolsbee, have offered mixed signals. Some highlight lingering inflation risks, while others acknowledge a gradual cooling in the labor market. Markets now assign roughly a 70% chance of a 25-basis-point rate cut in December, down from over 90% a week ago.

Looking ahead, market attention turns to the Australian Purchasing Managers Index (PMI) data due later in the day, which could offer fresh insights into domestic economic momentum and shape short-term moves in the Aussie.