The US dollar is continuing to drop against major currencies during the Asian morning trading session. There hasn’t been any new information added to what’s already known. All eyes are on upcoming Australian inflation data, which could impact the currency markets. We are closely watching the dollar’s movements as data releases could also have an effect.

US Dollar Loses Ground

The US dollar is losing ground, indicating a shift in market sentiment. Last week, the preliminary estimate for Q2 2025 GDP showed only a 1.4% growth, which was lower than expected. This has led to the belief that the economy may be slowing down. Traders seem to be adjusting their positions in anticipation of more significant data releases. This decline follows the Federal Reserve’s decision to keep interest rates unchanged during its July 2025 meeting, where the tone suggested a more cautious and data-focused approach. Currently, futures markets are reflecting a 65% likelihood of a rate cut by the end of 2025, a significant rise from the 40% chance just a month ago. This has been putting steady, albeit modest, pressure on the dollar. For those trading derivatives, implied volatility in key currency pairs is at a notably low level. The Currency Volatility Index (CVIX) is around 6.8, a figure we haven’t seen consistently since the calm periods of early 2024. In this environment, buying options is relatively cheap, helping traders position themselves for larger market moves with limited risk.

Looking Ahead to Australian Inflation Data

We are closely watching the upcoming Australian inflation data for Q2 2025, which will be released soon. The market expectations are for a 0.8% quarterly increase, but if the data comes in higher than this, it could sharply boost the Australian dollar against the US dollar. Consider short-term AUD/USD call options as a way to take advantage of this event risk. Looking back to late 2023, we saw the market start anticipating the end of the Fed’s aggressive interest rate hikes. During that time, the dollar began a slow, steady decline as economic data softened. This pattern suggests that the current market conditions could lead to a longer-term trend rather than just a temporary dip. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now