WEEKLY CURRENCY OUTLOOK

Weekly FX Update

28 September 2026

AUD at 0.702 as the RBA, Australian inflation and U.S. payrolls collide

The Australian dollar starts the week almost exactly where the next major battle is likely to occur: AUD/USD is around 0.7023–0.7024, after trading as low as 0.7004. The pair has fallen substantially from the 0.72+ levels seen earlier this month as U.S. yields and expectations for further Federal Reserve tightening have strengthened the USD.

The domestic picture, however, is moving in the opposite direction. The Reserve Bank of Australia meets Tuesday with markets pricing about a 95% probability of a 25bp increase from 4.35% to 4.60%. Governor Michele Bullock said last week that some upside inflation risks appear to be materialising, citing persistent domestic excess demand and elevated energy prices.

Then comes an unusual sequencing problem: Australian August CPI arrives Wednesday, immediately after the RBA decision. The number could therefore matter more than the hike itself because it will influence whether markets start seriously pricing another increase toward 4.85%.

Meanwhile, the U.S. side of AUD/USD remains formidable. The 10-year Treasury yield closed Friday around 5.16% after reaching 5.2297% — its highest since 2007.

And Friday brings September U.S. payrolls.

In other words:

RBA → Australian CPI → U.S. PCE → U.S. payrolls.

That is quite a week for AUD/USD.

What Is Driving the Australian Dollar?

1. Tomorrow’s RBA decision is the immediate event risk. The RBA confirms its decision will be released at 2:30pm AEST Tuesday, 29 September, followed by Governor Bullock’s press conference at 3:30pm. Reserve Bank of Australia

A 25bp hike to 4.60% is overwhelmingly expected, so the rate increase itself may not be enough to lift the AUD. The bigger question will be what the RBA says about further tightening. A clear warning that another hike remains possible could support the AUD; a “one and done for now” message could actually see the currency weaken despite the hike.

2. Wednesday’s Australian CPI could reset rate expectations immediately. The Australian Bureau of Statistics releases August CPI at 11:30am Wednesday. Building approvals are released at the same time. Australian Bureau of Statistics

Underlying inflation has remained stubborn, with trimmed mean inflation at 3.6%, above the RBA’s 2–3% target. Reuters A strong August CPI print would increase speculation that 4.60% may not be the peak. A softer number could quickly reduce expectations for another hike.

3. AUD/USD is back at the psychologically important 0.70 level. The fall from above 0.71 last week to 0.7019 leaves the currency sitting close to an important short-term threshold. Reserve Bank of Australia

The fact that the AUD weakened even as expectations for an RBA hike increased tells us something useful: global USD strength, elevated US yields and geopolitical risk are currently powerful enough to offset Australia’s improving yield advantage.

4. Oil has eased, but the problem has not disappeared. Saudi Arabia has restarted its East-West pipeline, and the US and Iran are discussing a possible phased arrangement that could ultimately reopen Hormuz. That helped oil retreat late last week. Reuters

But Brent above US$100 remains an inflation problem for Australia and the rest of the world. Any breakdown in negotiations could quickly reverse last week’s improvement.

5. US PCE gives the Fed another inflation test. The US Bureau of Economic Analysis releases August Personal Income and Outlays, including PCE inflation, at 8:30am ET Wednesday, alongside the third estimate of Q2 GDP. That is 10:30pm Wednesday Sydney time. bea.gov

With the Fed having just raised rates to 3.75%–4.00%, another firm inflation result would reinforce the stronger-USD narrative.

6. Friday’s payrolls could decide where AUD/USD finishes the week. The Bureau of Labor Statistics confirms the September Employment Situation report is due Friday, 2 October at 8:30am ET — 10:30pm Sydney time. Bureau of Labor Statistics

The previous report showed payroll growth of around 162,000 and unemployment at 4.1%. A stronger September result would support the USD and could put 0.70 under pressure; a weaker report would give the AUD some breathing room.

Market Snapshot

FX levels are the latest official RBA reference rates, published for Friday 25 September. Commodity prices and policy rates are the latest available market references entering the week.

Key Economic Events This Week (Sydney Time)

AUD Outlook

The AUD begins the week with a neutral-to-defensive short-term bias, but this is one of those weeks where that view could change very quickly.

Domestic monetary policy is clearly becoming more supportive for the currency. If the RBA hikes to 4.60% and keeps another increase firmly on the table, Australia’s rate differential becomes more attractive.

But the AUD’s failure to benefit from those expectations last week is a warning sign. AUD/USD has fallen back toward 0.70, the US dollar remains supported by tighter Fed policy, and geopolitical risks remain elevated.

The AUD-positive scenario would be an RBA hike with hawkish guidance, firm Australian CPI, easing oil prices and softer US PCE/payrolls. That combination could take AUD/USD back toward 0.71–0.72.

The AUD-negative scenario would be an RBA hike accompanied by cautious guidance, softer Australian CPI, renewed oil escalation and strong US PCE/payrolls. In that environment, 0.70 could break, opening the way toward the high-0.69 area.

For businesses with upcoming USD payments, this is a particularly event-heavy week. Tuesday afternoon, Wednesday morning, Wednesday night and Friday night all have credible potential to move AUD/USD.

For NZD payments, AUD/NZD around 1.24 remains favourable by recent historical standards.

For EUR and GBP payments, the AUD has held up better than it has against the USD, illustrating just how much of the recent AUD/USD weakness is really a US-dollar story.

Quick Take

AUD-positive: RBA hikes and remains hawkish + Australian CPI stays firm + US PCE/payrolls soften + oil continues easing.

AUD-negative: RBA signals a pause after tomorrow + Australian CPI cools + US data remains strong + Middle East negotiations fail.

Main level to watch: AUD/USD 0.70. Holding it through the RBA and CPI would be constructive. A decisive break below it would suggest the USD is winning the policy tug-of-war.

Biggest volatility windows: Tuesday 2:30–3:30pm, Wednesday 11:30am, Wednesday 10:30pm and Friday 10:30pm Sydney time.

This week’s market reminder: the RBA gets to make an interest-rate decision on Tuesday and receives the latest CPI on Wednesday. Somewhere, a central banker is looking at the calendar and asking who organised that.