RBA Governor Raises Inflation Worries

RBA Governor Michele Bullock has expressed concerns about inflation, which may influence future monetary policy. Traders are now less likely to expect a rate cut from the RBA next week and are leaning toward a potential rate hike next year. In contrast, there is almost a 90% chance that the US Federal Reserve will lower borrowing costs next week. The idea of a more lenient successor to Fed Chair Jerome Powell has weakened the US Dollar, bringing it to a one-month low. This drop in the USD, along with a strong equity market, supports the risk-sensitive AUD. The Australian Bureau of Statistics pointed out that the trade balance is crucial for assessing net export performance, essential for gauging economic health. The AUD/USD pair is maintaining its position above the 0.6600 mark, backed by solid reasons. The main factor is the growing gap between the hawkish Reserve Bank of Australia and the dovish US Federal Reserve. This difference is likely to guide trading in the upcoming weeks. Recent inflation data from Australia for the third quarter of 2025 shows a sticking rate of 3.8% year-on-year, far exceeding the RBA’s target range. Conversely, the latest US Non-Farm Payrolls report for November 2025 revealed a weaker job growth at 155,000, strengthening the anticipation of a Fed rate cut. This widening economic gap and differing central bank perspectives create a clear opportunity for the Aussie. For traders, this highlights the potential in taking long positions on the AUD/USD. Buying call options could be an effective way to gain exposure, especially with the US Fed’s interest rate decision approaching next week. This strategy allows for participation in a possible rally while setting risk limits based on the premium invested.

Currency Trends and Trading Strategies

We’ve also noticed that implied volatility for AUD/USD options has risen to a three-month high, indicating the market’s expectations of central bank activity. This higher premium environment makes selling cash-secured puts a tempting strategy for those willing to purchase the pair on a dip. This is particularly relevant if we believe the 0.6600 level will act as strong support. Looking back, we saw moments of central bank divergence, like in 2023, create impactful and lasting currency trends. The current situation is starting to mirror that period, with the RBA and Fed swapping roles. This historical pattern suggests the current movement could signal the beginning of a more significant, multi-month shift rather than just a temporary spike. Thus, a bullish call spread may also be a wise and cost-effective strategy. By buying a call at a lower strike price and selling one at a higher strike price, traders can aim for an increase towards the 0.6700 or 0.6800 levels. This limits the initial cost while still allowing for profit from the anticipated upward trend. Create your live VT Markets account and start trading now.

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