Australia National Australia Bank’s business confidence index rose from 4 to 7 in September. The increase reflects growing optimism among businesses despite challenging economic conditions.

In currency markets, the British pound experienced pressure due to demand for the Japanese yen, while maintaining a value above 202.50 ahead of UK employment data. At the same time, the Australian dollar witnessed a decline despite cautious sentiment about the Reserve Bank of Australia’s future interest rate decisions. The AUD/JPY currency pair fell to near 98.50 amidst expectations of cautious rate policies by the RBA.

Gold Prices Show Increases

In commodities, gold prices showed increases in Pakistan, India, and Malaysia, according to FXStreet data. The rise is amid broader market movements and geopolitical risks affecting investor sentiment towards precious metals.

As for global market analysis, the EUR/USD exchange rate saw minimal movement, holding above 1.1550 before Germany’s ZEW Survey data release. At the same time, preparations for upcoming speeches and economic reports continued to guide market expectations and positions.

With ongoing trade tensions between the US and China, US stock markets showed some recovery from recent declines. This was primarily amid easing trade tensions, restoring a sense of normality in financial markets.

We are seeing a notable uptick in Australian business confidence, which climbed to 7 in September from a previous reading of 4. This marks the highest level of optimism we’ve observed in business sentiment since the second quarter of 2025. This positive shift suggests that businesses are feeling better about future conditions.

Strengthening Confidence In Australian Dollar

This strengthening confidence should provide a tailwind for the Australian Dollar in the spot and futures markets. We are considering that call options on the AUD/USD, particularly with strike prices above the recent 0.6850 resistance level, are looking more attractive. This is based on the idea that the Reserve Bank of Australia might have to delay any planned rate cuts.

This outlook is supported by recent inflation data, with the Q3 2025 CPI coming in at 3.1%, which is still slightly above the RBA’s target band. With the official cash rate holding at 4.35% for the past year, this persistent inflation reduces the odds of easing anytime soon. Therefore, we should be cautious about pricing in any dovish pivot from the central bank.

Furthermore, the stabilization of iron ore prices around $115 per tonne provides a solid floor for the currency. Historically, a strong commodity market has been a key driver for the Australian economy and its currency. Traders might look at this as a reason to hedge against any potential downside in the Aussie by selling out-of-the-money puts.

On a relative basis, this contrasts with the more neutral stance from the US Federal Reserve, which continues to signal a ‘higher for longer’ policy without any immediate hawkish bias. This divergence could make long AUD/USD positions a compelling pair trade over the next few weeks. The key risk remains any unexpected downturn in global growth, particularly from China.

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