Insights 
VT 
Australia’s S&P Global Manufacturing PMI declined to 49.7 in October from 51.4 in September. This points to a contraction in the manufacturing sector, as any reading below 50 indicates such a trend.
The Australian Dollar remained steady after the release of the PMI data. Meanwhile, the USD/CNY reference rate was set at 7.0928 compared to the previous 7.1235.
US Dollar And Currency Trends
The US Dollar Index saw modest losses, remaining below 99.00, with attention on upcoming US CPI inflation data. NZD/USD was relatively unchanged, trading near 0.5750, ahead of US-China trade talks.
In currency news, EUR/USD held firm during the North American session, trading around 1.1617. GBP/USD slid for a fifth consecutive day, finding support just above the 1.3300 handle.
Gold entered a consolidative phase near $4,100, influenced by a rise in US Dollar and Treasury yields. Ethereum saw continued accumulation by whales, with wallets holding between 10,000 and 100,000 ETH increasing their holdings.
The Japanese Yen steadied following the appointment of Sanae Takaichi as Prime Minister. Aster’s price saw an increase, driven by positive trends in the cryptocurrency market, as Bitcoin surpassed $109,000 and Ethereum exceeded $3,800.
Australia’s Economic Outlook
The new data shows Australia’s manufacturing sector is now contracting, with the PMI falling to 49.7. This is a significant shift from growth to decline, suggesting a broader economic slowdown is taking hold. We believe this points to weakness for the Australian dollar in the near term.
This contraction puts direct pressure on the Reserve Bank of Australia to soften its policy stance. With the official cash rate at 3.5% and unemployment recently rising to 4.5%, further rate hikes are now highly unlikely. This mirrors the pattern we observed in 2023 when weak Chinese demand led to a dovish RBA pivot.
For derivative traders, this creates an opportunity to position for a lower AUD/USD. Buying put options on the Australian dollar offers a clear way to profit from this expected decline. This strategy allows for defined risk while capturing potential downside movement over the next several weeks.
The outlook is further clouded by external factors, as prices for iron ore, a key export, have fallen over 8% in October to below $100 per tonne. This drop in national income compounds the domestic manufacturing weakness we are now seeing. It strengthens our conviction that the path of least resistance for the AUD is lower.
While our focus is on Australia, we are also watching for the upcoming US inflation report. A higher-than-expected CPI figure in the US would likely boost the US dollar. This would add significant downward pressure on the AUD/USD pair and increase the potential gains from bearish option strategies.
