AUD/USD is currently sitting around 0.6600, close to a two-month high, as traders look forward to important US inflation data. Prices may keep rising, but traders are cautious and waiting for the US PCE figures to see if the upward trend will continue. The US Personal Consumption Expenditure (PCE) Price Index for October is due for release soon. This index, favored by the US Federal Reserve, could impact the USD depending on whether it suggests future interest rate cuts. Meanwhile, differences in policy expectations between the Fed and the Reserve Bank of Australia (RBA) support the AUD/USD pair.

Inflation and Monetary Policy

Recent US data shows the economy is cooling, with a weaker labor market. Some Fed officials anticipate an interest rate cut in December. Traders are betting on a 90% chance of a 25 basis point rate cut, which keeps the US dollar weak. RBA Governor Michele Bullock pointed out that inflation is still above the target of 2%-3%. Speculation around a possible rate hike supports the Australian dollar, benefiting AUD/USD. The Core PCE metric reveals price trends without the effects of food and energy prices. A higher reading could strengthen the USD by suggesting a change in Fed policy. As the US Federal Reserve is expected to cut rates next week, we see a clear policy divergence from the RBA. The latest US jobs report indicates a slowing economy, with only about 150,000 jobs added in November 2025. Meanwhile, inflation in Australia remains high at 3.8%, well above its target. This discrepancy suggests AUD/USD may continue to rise.

Trade Strategies Amid Data Releases

Today’s key event is the US Core PCE inflation report, the Fed’s preferred measure. We anticipate it will remain at 2.9%, reinforcing the case for a rate cut and putting further pressure on the US dollar. Looking back to late 2025, this 2.9% rate is a significant drop from the above 5% highs seen in 2022-2023, highlighting the success of disinflation. For traders confident that AUD/USD will keep rising, buying call options with expiries in January 2026 could be a smart move. This strategy allows us to benefit from a potential rise to 0.6700 or 0.6800 in the upcoming weeks. Options limit our risk to the premium paid, which is crucial due to possible short-term volatility around today’s data. Considering the uncertainty around the PCE numbers, another strategy is to trade the expected price movement itself. A long straddle, which means buying both a call and a put option with a near-term expiry, can profit if the data leads to a significant market move in either direction. This tactic isn’t focused on direction but on taking advantage of market reactions to this significant inflation report. Create your live VT Markets account and start trading now.

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