The Governor of the Reserve Bank of Australia, Bullock, is discussing the RBA’s goals on inflation and employment. A live link to the speech should be available soon. Technical analysis for USD/JPY is now looking at the Japanese upper-house election. The dollar is getting support early in European trading. Meanwhile, Trump is advocating for a 15–20% minimum tariff on all EU goods, which has caused EUR/USD to dip.

Core Inflation Outlook

The RBA Governor mentioned that core inflation in the second quarter may not have decreased as much as expected. On Thursday, there were conflicts between Thai and Cambodian forces. Trading in foreign exchange involves a significant level of risk. Leverage can increase both risk and potential losses. It’s important to consider your investment goals, experience level, and risk tolerance before you begin trading. investingLive offers economic and market information for educational use only. It does not endorse any opinions or recommendations. Clients and potential investors should evaluate all views and analysis based on their personal decision-making. investingLive does not guarantee past performance nor does it provide investment or trading advice. The site shares opinions and research on an “as-is” basis and disclaims any liability for losses that may arise from relying on this information. Advertisements on investingLive may lead to compensation based on user interactions.

Focus on Reserve Bank of Australia Policies

We are focusing on Bullock’s recent comment that Q2 core inflation may remain stubbornly high. This is in line with the latest data, which shows that the monthly CPI indicator unexpectedly increased to 4.0% in May, surprising many who anticipated a slowdown. As a result, the Reserve Bank of Australia might keep its cash rate at 4.35% longer than expected. Given this tough stance, we should rethink any bets on rate cuts in the near future. The market has already changed significantly, with interbank cash rate futures now suggesting over a 50% chance of another rate hike before the year ends. Traders may choose to sell Australian government bond futures in anticipation of higher yields. This difference in policy, where the RBA takes a strong position while others like Powell face pressure for cuts, creates a favorable situation for the Australian dollar. We might see traders buying AUD/USD call options to capitalize on potential gains, as rising local rates attract foreign investment. Historically, when the RBA is hawkish and the Fed is neutral or dovish, the currency often strengthens. However, Trump’s push for large tariffs adds an unpredictable factor that may increase market volatility. Such protectionist actions usually weaken currencies tied to risk, leading to a dilemma for the AUD. This uncertainty suggests it may be wise to employ strategies that benefit from higher volatility, such as buying straddles on the currency pair. Create your live VT Markets account and start trading now.

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