Insights 
VT 
The Reserve Bank of Australia’s trimmed mean consumer price index (CPI) exceeded forecasts by reaching 3% year-on-year in the third quarter, compared to the predicted 2.7%. This data point suggests an acceleration in inflation pressure in the Australian economy.
In related currency news, the NZD/USD remained near a three-week high but stayed below 0.5800 amid a modest increase in the US Dollar. Similarly, the Japanese Yen showed limited bullish movement ahead of upcoming policy decisions from both the Federal Reserve and the Bank of Japan.
Gold Market Recovery
The gold market is recovering from a recent three-week low as traders await the Federal Reserve’s rate decision. Gold bounced toward $4,000 early Wednesday, following a sharp correction from record highs of $4,382.
In the cryptocurrency sphere, Pi Network, Aerodrome Finance, and Official Trump have shown gains, surpassing broader market performance over the past 24 hours. These tokens are attempting to break out of their current patterns, with Pi Network aiming to exceed its 50-day Exponential Moving Average.
Lastly, a shift is observed in the financial markets, with less emphasis on dramatic Federal Reserve announcements and more on subtle liquidity operations, affecting market strategies and investor attention.
The 3% Trimmed Mean CPI print for Australia is a significant surprise, coming in well above the 2.7% forecast and landing right on the upper edge of the RBA’s target band. This effectively takes any near-term interest rate cuts off the table and forces us to consider the possibility of another hike. Derivative markets are now quickly repricing the odds, with the implied cash rate for mid-2026 moving higher.
Australian Dollar Positioning
This makes being long the Australian dollar an attractive position, particularly against currencies where central banks are leaning dovish, like the British Pound. We are seeing increased interest in AUD/GBP call options as bets for a Bank of England rate cut continue to build. For AUD/USD, which has been capped around the 0.6450 level for weeks, this could provide the catalyst needed to break higher, especially if the upcoming Fed decision is seen as neutral.
In the local market, we should anticipate rising volatility in Australian equities as higher-for-longer interest rate expectations set in. Looking at the ASX 200 options market, implied volatility has ticked up to its highest level in over a month, suggesting traders are buying protection or positioning for a larger-than-expected move. This is reminiscent of the market action we saw back in early 2024 when persistent inflation forced the RBA to maintain its hawkish stance longer than anyone anticipated.
However, all of this is happening in the shadow of the Federal Reserve’s looming policy decision. While Fed Funds futures suggest a greater than 90% chance that the US central bank will hold rates steady, the focus is now shifting to the Fed’s balance sheet and liquidity operations. Any commentary suggesting a change in the pace of quantitative tightening will have more impact on the US dollar than the rate decision itself.
This uncertainty is also influencing assets like Gold, which is finding support but struggling to make a decisive move toward the $4,000 mark. A surprisingly hawkish tone from the Fed could strengthen the US dollar and cap Gold’s advance, regardless of what happens elsewhere. Conversely, a dovish surprise would likely send the metal higher and amplify the Australian dollar’s recent strength.
