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Australia is set to release its inflation updates on Wednesday, with two inflation metrics being published by the Australian Bureau of Statistics. These updates precede the Reserve Bank of Australia’s monetary policy meeting on November 3-4.
The global markets started the week positively after news of a framework trade deal between the United States and China. The pending sign-off by Presidents Donald Trump and Xi Jinping offers a break from previous tensions.
Cryptocurrency News
In the cryptocurrency sphere, Pump.fun (PUMP) saw a rise above $0.0050 on Tuesday. This recovery is part of a broader positive sentiment in the cryptocurrency market, suggesting a potential rally by month’s end.
The Australian Consumer Price Index (CPI) is expected to increase, while markets assess the upcoming decision by the Reserve Bank of Australia. At the time of writing, the author has no stock positions mentioned and has no business ties with any company in the article.
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With Australian inflation data due tomorrow, we are watching for confirmation that the Consumer Price Index edged higher. This release comes just one week before the Reserve Bank of Australia’s November meeting, making it a critical data point. A higher-than-expected inflation figure could push the RBA towards a more hawkish stance.
Trading Opportunities
Given this outlook, we believe traders should consider buying call options on the Australian dollar against the US dollar to position for a potential rate hike. For those uncertain of the direction but expecting a large price swing, options strategies like straddles could capitalize on the expected volatility around the RBA announcement. These positions allow for profiting from a significant market move either way.
We are looking for the quarterly CPI to come in above the Q2 2025 figure of 1.0%, with market consensus hovering around a 1.2% increase. This would push the annual inflation rate closer to 4.0%, a level that puts significant pressure on the RBA as it sits well above its 2-3% target band. A strong number here would almost certainly be interpreted as a green light for tightening policy.
The broader market environment supports a stronger Australian dollar, as the recently announced framework trade deal between Washington and Beijing is reducing global uncertainty. This risk-on sentiment is generally favorable for commodity currencies like the AUD. The slight dip in the US 52-week bill auction yield to 3.445% also adds a subtle tailwind by signaling slightly softer long-term rate expectations in the United States.
Looking back at the RBA’s aggressive hiking cycle in 2023, we saw how AUD/USD could move more than 1.5% in the hours following a rate decision. Implied volatility for AUD options often spiked well into the double digits ahead of those meetings. This historical precedent suggests that volatility itself is a tradable event, as the market is primed for a sharp reaction to next week’s decision.
