AUD\/USD rises by 0.40% on Thursday, trading around 0.6510, driven by interest in commodity-linked currencies. This comes as markets anticipate the US inflation report set for release on Friday.<\/p>\n
The Australian dollar benefits from increasing commodity prices, with Oil and Gold showing particular strength. This occurs amid a tense geopolitical climate as the US considers new export restrictions on software products to China starting November 1.<\/p>\n
These potential restrictions respond to China’s recent limiting of rare earth exports to the US, posing a challenge for the Australian economy, which relies heavily on exports to China. However, markets are optimistic about a diplomatic resolution following an upcoming meeting in Malaysia.<\/p>\n
The main focus remains on the upcoming US Consumer Price Index (CPI) for September, delayed by the government shutdown. Expectations predict a rise to 3.1% YoY, up from 2.9% in August. These data points are pivotal for US monetary policy, with the Federal Reserve expected to cut interest rates next week.<\/p>\n
In Australia, attention pivots to preliminary Purchasing Managers Index (PMI) data released later in the day. Meanwhile, a speech by RBA Governor Michele Bullock is also anticipated early on Friday. The Australian Dollar is notably strong against the Japanese Yen according to the currency exchange heat map.<\/p>\n
We are watching tomorrow’s US inflation report very closely, as it is the most critical event for the coming weeks. Economists expect a rise to 3.1%, which will directly influence the Federal Reserve’s decision on interest rates next week. This makes the current strength in AUD\/USD above 0.6500 feel quite fragile.<\/p>\n
Despite the anticipated rise in inflation, market pricing suggests a near certainty of a Fed rate cut. The CME FedWatch Tool is showing an 88% probability of a 25-basis-point cut, which would be the first move down after rates held steady for most of 2025. This expectation is a major factor weighing on the US dollar and supporting the Aussie.<\/p>\n
On the Australian side, the currency is getting a significant boost from rising commodity prices. Iron ore, a vital export, has pushed above $130 per tonne, a level we have not seen since early 2024. However, we cannot ignore the risk from the US-China trade talks this weekend, as Australia’s economy is highly sensitive to Chinese demand.<\/p>\n
This combination of a key inflation report and a crucial diplomatic meeting points to a spike in volatility. We believe setting up trades that profit from a large price swing, regardless of direction, could be a prudent strategy. An unexpected inflation number or a breakdown in trade talks could easily move the market by more than 1% in a single session.<\/p>\n
For those with a directional view, buying call options on AUD\/USD would be a way to bet on a dovish Fed and successful US-China negotiations. Conversely, buying put options offers a hedge against a hawkish surprise from the inflation data or a return to trade-war rhetoric. Looking back at the market swings during the 2018-2020 trade disputes, we know how quickly sentiment can turn negative.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" AUD\/USD climbs amid rising commodity prices and US inflation anticipation; markets eye upcoming CPI data.<\/p>\n","protected":false},"author":62,"featured_media":16965,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-33053","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/33053","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=33053"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/33053\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/16965"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=33053"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=33053"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=33053"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}