Reserve Bank of Australia Governor Michele Bullock is due to face the media at 4.30 GMT under a reporting format introduced last year, after the RBA held its benchmark rate unchanged at 4.35% at the August meeting. Board members extended a pause that follows three consecutive 25 bps increases earlier in the year, and the decision was unanimous. The RBA said inflation remains too high, with trimmed mean inflation still elevated and little changed from the March quarter, while short-term inflation expectations have eased but remain above earlier levels. Monetary policy was described as somewhat restrictive; the labour market is still a little tight with leading indicators suggesting only limited near-term easing, and the RBA said it could raise the cash rate again if upside risks materialise, including scenarios tied to an unresolved Middle East conflict that could leave inflation higher and activity weaker than forecast.<\/p>\n
In updated projections, trimmed mean inflation is seen above 3% until mid-2027, reaching 2.5% by early 2028, with profiles of 3.3% in Q4 2026, 2.6% in Q4 2027 and 2.4% in Q4 2028. CPI inflation is forecast at 3.6% in Q4 2027, then 2.6% and 2.4% in Q4 2027 and Q4 2028, while GDP growth is put at 1.4%, 1.6% and 1.8% for Q4 2026-28 and unemployment at 4.5%, 4.7% and 4.8%. The cash-rate track assumes 4.4% in Q4 2026, 4.5% in Q4 2027 and 4.4% in Q4 2028; the economy is expected to return to balance in 2027, housing has softened more than expected and loan growth is set to slow, while the AUD\/USD was last down 0.10% at 0.7049.<\/p>\n
We advise derivative traders to focus on range-bound strategies for the AUD\/USD pair in the coming weeks, as the market digests the RBA’s decision to hold rates at 4.35%. With the pair steady near 0.7049, traders should look to buy dips near the moving average confluence around 0.7000. Upside option structures, such as bullish call spreads, could capture a potential push toward the 0.7145 resistance level if inflation risks persist.<\/p>\n
In the interest rate swap market, we recommend positioning for a “higher-for-longer” yield environment given that the RBA does not expect inflation to return to its target midpoint until late 2027. Recent Australian three-year government bond yields have stabilized around 3.75%, indicating that the market has drastically scaled back rate cut expectations for this year. Shorting short-term interest rate futures could yield steady returns as the market aligns with the RBA’s hawkish bias.<\/p>\n
We must also monitor the energy markets, especially since Australia\u2019s fuel excise discount recently expired, which historically adds about 0.15% to quarterly CPI. With global Brent crude oil prices fluctuating near $80 per barrel due to persistent Middle East tensions, headline inflation faces immediate upside risks. Traders can hedge these risks by utilizing long volatility strategies on energy-sensitive currency crosses like AUD\/JPY.<\/p>\n
Historically, when the RBA maintains a restrictive stance while global central banks hint at easing, the AUD\/USD has shown an upward bias, averaging a 1.8% gain over a 30-day period. Currently, the 200-day simple moving average at 0.6926 provides a robust floor for any downward corrections. We suggest placing tight stop-losses just below this critical support level to mitigate downside exposure while keeping a bullish outlook intact.<\/p>\n\n\n\n