The Australian dollar rose in European trading on Thursday against a basket of major currencies, extending gains for a third consecutive session against the US dollar and reaching its highest level in five weeks, as buying momentum strengthened amid fading expectations that the Reserve Bank of Australia will cut interest rates at next weeks policy meeting.

Market expectations for stronger economic performance in Australia during the fourth quarter have grown, alongside a renewed acceleration in prices and an uptick in inflation factors that increase pressure on policymakers at the RBA and support a more hawkish policy stance to counter resurgent inflation and maintain price stability.

Price Overview

AUD/USD climbed 0.2% to 0.6615, the highest since 29 October, up from todays opening level of 0.6601, after touching an intraday low of 0.6599.

The Australian dollar ended Wednesdays session up 0.55% against the US dollar, marking its second consecutive gain amid improving risk appetite across global markets.

Australian Interest Rates

Recent data from Australia showed a decline in unemployment and an increase in new jobs in October, highlighting ongoing tight conditions in the labor market.

These figures strengthened expectations of improving economic activity in the fourth quarter, coinciding with a renewed rise in inflation and price pressures.

As a result, the likelihood of an RBA rate cut at next weeks final meeting of the year has diminished significantly.

Market pricing currently places the probability of a 25-basis-point rate cut in December at just 10%.