Australia’s unemployment rate rose from a revised 4.3% to 4.5% in September, going against the expected 4.3%. In August, employment data was revised down by 12,000 jobs, but September saw a gain of 15,000 jobs. This means hiring has remained flat over the past two months. The increase in unemployment is mainly due to more people participating in the workforce, indicating that labor market conditions haven’t worsened significantly. The Reserve Bank of Australia (RBA) may decide not to cut rates at their meeting on November 4, depending on the inflation data from the third quarter.

Recent Inflation Data

Inflation data for the past two months has been higher than expected. This might lead the RBA to postpone any rate cuts until December, although trade news continues to heavily influence the markets. The Australian dollar (AUD) may aim for a target of 0.68 against the USD, with trade updates affecting market movements. The latest unemployment figures, showing a rise to 4.5%, are putting some pressure on the Australian dollar. However, we don’t think this automatically means a rate cut next month. Instead, it raises the importance of the inflation figures coming out on October 29th. These results will be critical for the RBA’s decision on November 4. Inflation has been a challenge throughout 2025, with monthly CPI readings often above the RBA’s target of 2-3%. This trend was evident in the second quarter, where non-tradable inflation remained persistently high. If the quarterly inflation figure on October 29th is high, the central bank may have to delay any rate cut until at least December.

Market Strategies

For traders in derivatives, there’s a clear opportunity around the upcoming inflation data. Using options on Australian interest rate futures could be beneficial for anticipating increased market volatility. A straddle strategy, which profits from big price swings in either direction, could be effective once the RBA’s next move becomes clearer. In the foreign exchange market, traders can use AUD/USD options to take advantage of this uncertainty. If a high inflation print occurs and the RBA doesn’t cut rates, AUD call options may do well as the currency strengthens towards the 0.6800 level. On the other hand, a lower-than-expected inflation number would likely lead to a rate cut in November, pushing the Aussie dollar down and making put options profitable. External factors also play a role, with trade news continuing to be a significant influence. Data from early October 2025 indicated a slight drop in demand for Australian iron ore from China, which could negatively impact the Aussie dollar, regardless of the RBA’s decisions. This creates a bearish environment that may limit any potential gains in the currency. Historically, the RBA prefers to act cautiously, as seen during the easing cycle in 2019 when they waited for clear signs of economic weakness before cutting rates. This past behavior supports our belief that the bank will likely maintain its position in November if inflation isn’t clearly weak. We expect a December cut, and trading strategies should reflect this likelihood. Create your live VT Markets account and start trading now.

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