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Financial Market Trends
Australia’s Consumer Price Index (CPI) for the third quarter rose to 3.2% year-on-year, surpassing the forecast of 3%. This increase suggests a mild acceleration in inflation within the country.
In related financial news, the Japanese yen appears weak as the market awaits policy decisions from the Federal Reserve and the Bank of Japan. Similarly, gold prices are climbing back from a three-week low as traders gear up for the Federal Reserve’s upcoming monetary policy announcement.
The British pound remains pressured against the US dollar amid potential rate cuts from the Bank of England. Meanwhile, the Australian dollar maintains its gains following the rise in domestic inflation in Q3.
On the cryptocurrency front, Pi Network, Aerodrome Finance, and the Official Trump token have shown notable performance, outpacing the broader market. Additionally, there is a focus on the Pi Network aiming to exceed its 50-day Exponential Moving Average.
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Interest Rate Implications
The Australian consumer price index coming in at 3.2% for the third quarter, above the 3.0% we expected, changes things. This surprise inflation reading makes it much harder for the Reserve Bank of Australia to consider cutting interest rates anytime soon. We should now be prepared for the RBA to maintain a hawkish stance, and another rate hike is not off the table.
This data strengthens the Australian dollar, and we see opportunities in pairing it against currencies where central banks are looking to ease policy. For instance, with the Bank of England still signalling potential rate cuts, buying the Aussie against the British Pound (AUD/GBP) is a logical play. The Australian dollar is also holding its gains against the US dollar, which faces its own uncertainty from the ongoing government shutdown.
Looking at the numbers, this jump to 3.2% represents an acceleration from the 3.0% annual inflation we saw in the second quarter of 2025. This moves the country further from the RBA’s 2-3% target range and suggests underlying price pressures are not fading as quickly as hoped. Interest rate futures markets are already reacting, pushing back the timeline for any potential RBA rate cuts well into 2026.
This situation in Australia contrasts with what we are seeing elsewhere, creating a clear policy divergence for us to trade. The US Federal Reserve is expected to hold rates steady at its upcoming meeting, with recent American inflation trending closer to target at 2.9%. This difference in inflation pressure should provide continued support for the AUD/USD exchange rate in the coming weeks.
We have seen this before, remembering the RBA’s aggressive rate hikes through 2023 when inflation proved sticky. Options traders should anticipate a rise in implied volatility for the Aussie dollar as the market reprices central bank expectations. The possibility of the RBA being one of the last developed market banks to pivot creates a clear opportunity for momentum strategies.
