Australian Dollar Rises as U.S. Dollar Struggles with Shutdown Fears
The Australian dollar moved higher against the U.S. dollar as worries about a possible U.S. government shutdown pushed the greenback lower. The AUD/USD pair kept rising for the second session, as traders waited for updates from Washington.
The weakness in the U.S. dollar also comes from fresh inflation data, which has raised chances of a Federal Reserve interest rate cut. Markets now expect a high chance of a cut in October and another possible cut in December.
In Australia, the outlook is different. The Reserve Bank of Australia (RBA) is not expected to cut rates soon. Market bets for a rate cut in September are only about 6%, and around 38% for November. This gives the Australian dollar more support compared to the U.S. dollar.
On the fiscal side, Australia reported a budget deficit of A$10 billion for the year ending June 2025. This was much smaller than the earlier forecast of A$27.9 billion, showing stronger financial health.
At the same time, political tension in the U.S. is rising. If Congress does not pass a funding deal by October 1, a shutdown could begin, delaying economic data and adding new tariffs on goods.
Impact:
The Australian dollar could stay firm if U.S. shutdown worries continue. A Fed rate cut might weaken the U.S. dollar further, supporting AUD strength.