Australia’s Producer Price Index (PPI) for the second quarter has risen by 0.7% compared to the previous quarter. This is a drop from a 0.9% rise in the first quarter. It’s the slowest growth we’ve seen since mid-2023. Year over year, the PPI went up by 3.4%. This is the lowest rate since Q3 2021, down from a prior increase of 3.7%. Currently, the exchange rate between the Australian dollar and the US dollar is around 0.6434.

Recent Developments

In recent news, Trump announced a tariff that places Australia in a good position with a 10% tariff rate. Today, changes in the AUD/USD market have been minimal. We are expecting new data from China soon, particularly the second manufacturing PMI for Asia, which will be released on Friday, August 1, 2025. The producer price data released today indicates that inflation in Australia is cooling faster than expected. This is the slowest rate of price growth from producers since mid-2023. This trend could lead the Reserve Bank of Australia to reconsider its strict monetary policy. Due to this disinflationary trend, we are considering buying put options on the AUD/USD. This strategy could help us profit if the Australian dollar declines. With the RBA’s cash rate steady at 3.85%, the chances of a rate cut before the year ends have increased.

China’s Manufacturing PMI and Market Volatility

The next significant event is the release of China’s manufacturing PMI data later today. Recent numbers have not been encouraging, with July’s Caixin Manufacturing PMI showing a troubling 49.8, indicating contraction. Another weak report will likely have a negative impact on the Aussie dollar since China is our largest export market. We also need to consider the current US tariff situation, where Australia has secured a relatively low 10% rate. While this helps protect us against competitors, it does not change the underlying dynamics driven by interest rate differences. We saw similar trends during the 2018-2019 trade disputes when the AUD still weakened despite having some trade benefits. Implied volatility for AUD options is rising ahead of this data release. This indicates that the market expects significant price fluctuations soon. Taking positions in the coming days could be beneficial before the volatility becomes more costly. Create your live VT Markets account and start trading now.

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