The Australian Dollar (AUD) strengthens following the Reserve Bank of Australia’s (RBA) policy decision to raise interest rates by 25 basis points to 3.85%, as expected. RBA Governor Michele Bullock emphasised the need to control inflation, which remains above target, leading to a 1% rise in AUD\/USD to 0.7020.<\/p>\n
Meanwhile, the US Bureau of Labor Statistics postponed data releases due to a partial government shutdown. The US Dollar Index remains below 97.50 despite a 0.5% increase on Monday, while US stock index futures range between 0.1% and 0.5%.<\/p>\n
Gold reverses a 4% loss and rises nearly 5%, trading just below $4,900, while silver recovers 8.5% after a 7% drop, trading above $86. The EUR\/USD climbs above 1.1800 amidst USD selling pressure, and GBP\/USD edges higher around 1.3700.<\/p>\n
USD\/JPY rises over 0.5% but stabilises around 155.50. The European Central Bank is set to announce monetary policy decisions on Thursday, possibly affecting these currency dynamics further. <\/p>\n
The Australian Dollar is influenced by RBA decisions, trade balance, iron ore prices, and the Chinese economy, all of which drive demand for AUD. Interest rates and economic health in trading partner China are also key factors.<\/p>\n
The Reserve Bank of Australia’s decisive rate hike to 3.85% creates a clear divergence against a United States hampered by a government shutdown. This policy split strongly suggests favoring the Australian Dollar over the US Dollar. We should consider buying call options on AUD\/USD to capitalize on this expected upward momentum in the near term.<\/p>\n
A key risk to this outlook, however, remains the health of the Chinese economy. We saw throughout 2025 how its official manufacturing PMI struggled to consistently stay above the 50-point mark, indicating a fragile recovery. Any further signs of weakness from our largest trading partner could put a ceiling on the Aussie’s recent gains.<\/p>\n
On the other hand, we must watch iron ore prices, which provided strong support last year by consistently trading above $130 a tonne. That price resilience, which we saw was tied to hopes of Chinese stimulus, creates a solid foundation for the AUD. Derivative positions should be structured to account for potential volatility if prices break below that key historical level.<\/p>\n
The US data blackout is the primary variable, creating short-term dollar weakness due to uncertainty. We remember the volatility during the shutdown back at the end of 2024, when the market was flying blind for weeks. When government funding is eventually restored, the release of delayed employment and inflation figures will likely cause a significant volatility spike.<\/p>\n
Given the improving risk mood reflected in rising stock futures, pairing the strong Aussie against a weaker safe-haven currency is a logical strategy. The AUD\/JPY cross, therefore, looks particularly attractive for long positions. This trade benefits from both the RBA’s hawkish stance and a broader market appetite for riskier assets.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" AUD rises after RBA rate hike; inflation concerns persist. USD mixed amid shutdown; gold, silver rebound sharply.<\/p>\n","protected":false},"author":62,"featured_media":16961,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-40794","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\/40794","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=40794"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/40794\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/16961"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=40794"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=40794"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=40794"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}