Australian dollar rallies to over one-month high

The Australian dollar climbed above $0.66 on Tuesday, advancing for a third straight session and hitting its strongest level in more than a month.

The move was driven largely by a weaker US dollar, as expectations build for steeper interest rate cuts from the Federal Reserve.

Markets are now assigning an 89% chance of a 25 bps cut at next week’s meeting, with some participants even betting on a more aggressive 50 bps reduction.

Domestically, economic data painted a softer picture. The Westpac-Melbourne Institute Consumer Sentiment Index slipped 3.1% to 95.4 in September, erasing last month’s 5.7% rebound that had lifted sentiment to its highest level since early 2022.

The decline highlights lingering consumer pessimism and ongoing concerns over household demand. At the same time, the NAB Business Confidence Index eased to 4 in August — a three-month low — down from a revised 8 in July, which had marked the strongest reading since August 2022.