The week starting August 11 will kick off quietly, with no major data impacting the FX market on Monday. However, important announcements are expected on Tuesday, including Australia’s RBA monetary policy, labor statistics from the U.K., and U.S. inflation data. On Wednesday, Australia will report its wage price index, and Canada will provide a summary from the Bank of Canada. Thursday will feature Australia’s employment data and the U.S. Producer Price Index. On Friday, the U.S. will share information on retail sales, consumer sentiment, and inflation expectations.

RBA Policy Expectations

The Reserve Bank of Australia (RBA) is likely to reduce its cash rate by 25 basis points to 3.60%. Recent data shows inflation decreasing to 2.1% and slower job growth, with unemployment rising slightly to 4.3%. These trends, along with wage growth, will likely shape future policies. In the U.K., the average earnings index is expected to be at 4.7%, with a claimant count change of 20.8K, and unemployment remaining stable at 4.7%. Despite a drop in payroll employment, the Bank of England reports a steady labor market outlook. The U.S. core CPI is projected to rise by 0.3%, with headline CPI at 0.2%. Year-over-year CPI expectations are slightly higher at 2.8%. This data is key for evaluating potential Fed rate cuts, especially considering ongoing tariff effects on inflation. Previously, U.S. core CPI increased by 0.3%, bringing the yearly rate to 3.0%. Concerns about tariffs persist, leading to predictions of a possible 25 basis points Fed rate cut in September due to signs of weakness in the labor market.

Australia Employment Projections

In Australia, an employment change of 25.3K is expected, with a slight drop in unemployment to 4.2%. U.S. core retail sales month-over-month are forecasted at 0.3%, while total retail sales month-over-month are expected at 0.5%. Growth is anticipated to receive a boost from a projected 7% rise in auto sales. However, consumer trends show cautious spending, with a decrease in discretionary goods and services spending. Looking ahead from August 11, 2025, this week is important for central bank policies and inflation data. A calm start is expected today, but volatility may occur starting tomorrow with major releases from Australia, the U.K., and the U.S. This could lead to significant changes in the foreign exchange and interest rate markets. For Australia, we expect the RBA to lower its cash rate to 3.60% on Tuesday. This prediction is backed by the sharp drop in annual inflation to 2.1%, down from over 7% in late 2022. The rise in unemployment to 4.3% this year reinforces the case for easing policy. Given the likelihood of a rate cut, we should prepare for a weaker Australian dollar. Traders could consider buying put options on the AUD/USD pair to position for potential declines, especially if the RBA indicates further cuts. Any surprise decision to hold rates steady could lead to a sharp, albeit temporary, rally in the currency. In the U.S., Tuesday’s inflation data is crucial for guiding the Federal Reserve’s plans for a rate cut in September. After holding rates above 5% for nearly two years, the market is keen for signs of continued cooling. While headline inflation is expected to be modest, a strong core reading of 0.3% might delay expectations for a quick cut. This uncertainty around U.S. inflation suggests increased short-term volatility for the U.S. dollar. We might explore options strategies like straddles on major USD pairs or interest rate futures ahead of the announcement. This approach allows us to benefit from significant price swings in either direction without betting on the inflation report outcome. Next, we turn to the U.K., where we expect Tuesday’s labor report to indicate ongoing cooling, with wage growth forecast to drop to 4.7%. This decrease is significant compared to levels above 8% seen in 2023, giving the Bank of England more reasons to maintain its steady outlook. A weaker labor market indicates that past rate hikes are affecting the economy. This environment is generally bearish for the British pound. If the labor data meets or falls short of expectations, the currency may face further drops. We could prepare for this by considering short positions in GBP/USD or buying put options on the pound. With both the RBA and Bank of England adopting dovish stances, opportunities might arise in cross-currency pairs. If U.S. inflation data comes in higher than expected, a long USD/AUD or long USD/GBP trade could be appealing. This strategy allows us to take advantage of differing monetary policies between central banks. Finally, we will monitor U.S. retail sales on Friday to assess consumer health. While the headline figure is expected to be positive, this strength seems driven by a temporary rebound in auto sales. Excluding that factor, the underlying data points to a cautious consumer, supporting the view of a slowing economy. Create your live VT Markets account and start trading now.

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