The S&P Global Manufacturing Purchasing Managers’ Index (PMI) for Australia increased to 52.4 in January, up from 51.6. This rise shows that the manufacturing sector is getting stronger, with steady demand for goods indicating continued growth. Manufacturers are responding positively to this demand, resulting in increased production and new orders. These developments highlight the resilience of the Australian economy, even amidst tough global conditions.

Impact on Monetary Policy

Traders and analysts are keeping a close eye on how this data could affect monetary policy. As the Reserve Bank of Australia weighs its options, there may be discussions about adjusting interest rates and future economic plans. The upbeat trend in Australia’s manufacturing sector suggests potential growth in the coming months. With the Australian manufacturing PMI rising to 52.4, we see a clear sign of strengthening economic momentum. This unexpected strength indicates that demand remains strong, leading traders to consider optimistic positions. In the short term, buying call options on the ASX 200 index (XJO) could be an effective way to take advantage of this positive outlook. This data adds complexity to the Reserve Bank of Australia’s plans, which has kept the cash rate steady at 4.35% throughout 2025 while monitoring inflation. With quarterly inflation closing last year stubbornly above 3%, this robust activity report makes a near-term interest rate cut unlikely. Traders should adjust their interest rate futures positions to account for the low probability of cuts in the first half of the year.

Australian Dollar and Commodities

The Australian dollar should also be a major focus, as it looks for a catalyst to rise. In the last quarter of 2025, the AUD/USD was mostly trading sideways around the 0.67 level. This PMI report, hinting at a hawkish stance from the RBA, could help push the currency higher. Thus, buying AUD call options or AUD/USD futures could be a smart strategy. This manufacturing strength is closely tied to the demand for raw materials, which boosts the outlook for major commodity producers. We’ve observed the solid performance of iron ore prices, which have remained above $130 per tonne lately. Therefore, we believe that buying call options on major resource companies could be a good way to gain targeted exposure to this ongoing economic strength. Create your live VT Markets account and start trading now.

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