The Australian dollar (AUD) has shown strong performance recently, extending gains amid a risk-on trade as markets anticipate a potential interest rate cut from the Federal Reserve. In the coming days, the focus will shift to the Reserve Bank of Australia (RBA) as it is expected to address future monetary policy changes.
Recent developments indicate a surge in Australian household spending, with a notable 1.3% increase in October, which is the largest monthly rise in nearly two years. This uptick, coupled with robust economic growth—2.1% GDP increase year-on-year in Q3 2025—suggests the possibility of a tighter monetary policy from the RBA, conflicting with previous expectations for rate cuts. Persistent inflation concerns, rising to 3.8% year-on-year, have further dampened the outlook for aggressive easing measures.
The RBA is reevaluating several factors influencing its monetary policy, including changes in business pricing strategies and the overall supply capacity of the economy. Analysts speculate that these developments could shift the current cash rate of 3.6%, particularly in response to high inflation and strong economic indicators.
Conversely, the Philippine peso (PHP) is facing pressure, recently depreciating to a record low against the US dollar. Concerns over economic slowdown, linked to controversies surrounding infrastructure spending, and expectations for further monetary policy easing from the Bangko Sentral ng Pilipinas (BSP) are influencing this trend. The current inflation rate remains subdued at 1.7%, allowing room for potential interest rate cuts to bolster economic activity.
In the currency market, the AUD is currently trading at 90-day highs near 39.46 PHP, representing a 3.1% increase above its three-month average of 38.26 PHP. The exchange rate has remained within a stable range of 37.55 to 39.46 PHP. Given the latest economic indicators and potential shifts in policy, market analysts suggest that the AUD may continue its upward trajectory against the PHP, driven by stronger economic fundamentals in Australia compared to the challenges facing the Philippines.
