Markets now price a 48.4% chance of a 25 basis point Fed hike in December, up from 14.3% a week ago.
The AUD/USD pair remains flat near 0.7150 in early Asian trading, retreating from multi-year highs as US rate expectations shift. Rising Fed hike bets and Middle East tensions weigh on the pair, offsetting earlier gains.
A week ago, markets assigned just a 14.3% probability to a December rate hike. That figure has now jumped to 48.4%, according to the CME FedWatch tool. Fed officials have signaled inflation control as a priority, with some not ruling out further tightening if price pressures persist.
Geopolitical risks also cap upside for the Australian Dollar. US-Iran tensions over the Strait of Hormuz remain unresolved, with President Trump issuing fresh warnings. A prolonged conflict could boost demand for the safe-haven USD, pressuring AUD/USD further.