Insights 
VT 
The Australian Dollar stabilises after reaching its lowest point since late September. The US government shutdown, now in its second week, impacts market confidence as key economic data releases remain suspended.
AUD/USD hovers around 0.6580, following a recent low of 0.6556, with caution prevailing before the Federal Open Market Committee Minutes. The US Dollar Index shows a minor retreat from its two-month high of 99.05.
Fed Reduction and Rate Cuts
The Federal Reserve has reduced its rate by 25 basis points, with a range of 4.00%-4.25%, hinting at more cuts. The CME FedWatch tool indicates over an 80% chance of 25-basis-point cuts at the next meetings.
The US budget deadlock, continuing into its second week, affects sentiment with postponed key data like Nonfarm Payrolls. This increases uncertainty over the US growth outlook amid the ongoing shutdown.
In Australia, there’s anticipation for Thursday’s release of one-year forward Consumer Inflation Expectations. Previously, the Reserve Bank of Australia noted an increase to 4.7% in September, suggesting a cautious central bank stance due to persistent inflation pressures.
The Australian Dollar shows its strongest performance against the Swiss Franc today. Percentage changes are displayed in a heat map, comparing major currencies.
We are seeing a familiar pattern in the Australian dollar’s behavior when we look back at past market stress, such as the US government shutdown in late 2023. At that time, AUD/USD was struggling around 0.6580, whereas today it is trading with more confidence near 0.6750. This historical resilience suggests that underlying support for the Aussie has improved since then.
Interest Rate Environment and Strategy
The interest rate environment has changed significantly, which is critical for our strategy. Back then, the market was pricing in aggressive Fed rate cuts from a peak of over 4.00%; today on October 9, 2025, the official cash rate is lower at 3.50%-3.75% and the focus is now on the upcoming US Consumer Price Index (CPI) data. Current forecasts for the September 2025 CPI data, due next week, anticipate a year-over-year figure of 3.6%, a slight cooling that could weaken the US dollar if the actual number comes in lower.
On the Australian side, conditions have also evolved from the high-anxiety period of late 2023 when one-year inflation expectations were a worrying 4.7%. We’ve seen that figure cool substantially, with the latest data from September 2025 showing consumer inflation expectations have fallen to 3.1%. This has allowed the Reserve Bank of Australia to hold its cash rate steady at its last meeting, providing a stable backdrop for the currency.
Given the upcoming US CPI release, traders should consider options to manage potential volatility in AUD/USD over the next two weeks. Buying AUD call options could be a prudent strategy to capitalize on a potential rally if US inflation comes in softer than expected, weakening the greenback. Conversely, if we believe there is a risk of a surprisingly high inflation number, purchasing AUD put options would offer protection against a sharp downturn.
We should also watch the US Dollar Index (DXY), which provides a broader view of the greenback’s strength. While the DXY was retreating from a high of around 99 back in late 2023, it has since found a stronger footing and currently sits near 104, reflecting persistent global economic uncertainties. This underlying strength in the dollar means any AUD rally could be met with resistance, making range-trading strategies using futures or options viable until a clear trend emerges after the CPI data.
