Insights 
VT 
The AUD/USD remains near 0.6550 after China’s Trade Balance data was released. This data shows a Trade Surplus for September of $90.45 billion, lower than the anticipated $98.96 billion. The US government shutdown is expected to persist until at least Tuesday due to the Columbus Day holiday.
China’s Trade Impact
China’s Trade Balance data for September came in at CNY645.47 billion, down from CNY732.7 billion. Both China’s exports and imports increased in September, with exports rising by 8.4% YoY and imports by 7.5% YoY, compared to previous figures of 4.8% and 1.7% respectively.
Trade tensions between China and the US have impacted the AUD/USD. President Trump announced plans to impose 100% tariffs on Chinese imports, while China promised to retaliate. However, Trump later expressed a willingness to support China’s economy.
In Australia, discussions have begun on a A$1.2 billion minerals strategic reserve. Australia’s critical mineral pricing and rare earth projects are being considered in a deal with the US.
The US Dollar’s weakness due to the shutdown may support the AUD/USD. Paychecks for federal employees are delayed, with the shutdown expected to continue as no resolution is in sight.
Key Factors Affecting the Australian Dollar
Key factors affecting the Australian Dollar include Reserve Bank of Australia interest rates, China’s economic health, and Iron Ore prices. The Trade Balance, representing the difference between export earnings and import spending, also significantly impacts the currency.
We are seeing the AUD/USD hover near 0.6550, reacting to the latest mixed signals from China’s economy. China’s Q3 2025 GDP growth was just reported at 4.8%, missing the 5.0% expectation and reminding us how sensitive the Aussie is to its largest trading partner. This echoes past instances where weaker-than-expected Chinese trade data immediately capped any AUD strength.
On the other side of the pair, the US Dollar is finding its own momentum stalled by political uncertainty. Lingering debates in Congress over the upcoming budget deadline are creating a sense of caution, bringing back memories of past government shutdowns that temporarily weakened the dollar. With the Federal Reserve now holding interest rates steady, this political risk is preventing a decisive breakout for the USD.
For Australia, the domestic picture is one of patience from the central bank and reliance on commodity prices. The Reserve Bank of Australia is holding its cash rate at 4.10%, but the market is closely watching for any hints of future cuts as inflation has cooled significantly since the highs of 2023. Meanwhile, iron ore prices have softened to around $110 per tonne amid concerns over Chinese construction demand, putting a natural ceiling on the Australian dollar’s value.
Looking back, we remember the extreme volatility during the US-China trade disputes of the late 2010s, where tariff threats could move the market several percentage points in a day. Those events taught us that the AUD is not just an economic currency but also a proxy for global risk sentiment, especially concerning China. Derivative traders should therefore remain hedged against sudden geopolitical flare-ups, as tensions between the major powers continue to simmer under the surface.
Given the conflicting pressures of a soft Chinese outlook against a politically capped US dollar, implied volatility in AUD/USD options has fallen. This environment suggests that range-trading strategies could be effective in the coming weeks. Selling option strangles with strikes set outside the recent 0.6400 to 0.6650 range may allow traders to collect premium while the major economic drivers remain in a holding pattern.
