The Australian Dollar is stable against the US Dollar, trading at around 0.6511. This comes after mixed economic data from the US, including reports on the Consumer Price Index (CPI) and S&P Global PMI. A lower-than-expected inflation report initially weakened the US Dollar, which helped the Australian Dollar rise.

US Economic Data

However, strong business activity data helped the US Dollar bounce back. The US Dollar Index is now at about 99.00, up around 0.4% this week. The US CPI increased by 0.3% month-over-month, falling short of the 0.4% forecast, and rose 3.0% year-over-year. Core CPI figures were also lower than expected. The S&P Global Flash Composite PMI climbed to 54.8 in October, with both service and manufacturing sectors improving. Still, a survey from the University of Michigan showed weak confidence among households. The AUD/USD is trading in a narrow range between 0.6480 and 0.6520, with slight bearish indicators. The Reserve Bank of Australia’s Trimmed Mean CPI is updated quarterly and is key to understanding inflation trends. Currently at 2.7%, this measure influences the RBA’s interest rate decisions. The next update is expected on October 29, 2025. As of October 24, 2025, the AUD/USD remains in a tight range around 0.6511, reflecting uncertainty. The market is weighing mixed signals from the US: softer inflation data hints at economic weakness, while strong business numbers suggest resilience. This uncertainty provides traders with opportunities to capitalize on volatility ahead of important events.

Fed and RBA Outlook

The US Federal Reserve seems to be on track for further rate cuts, especially since the September 2025 cut. Recent data confirms a slowdown, with third-quarter GDP growth in the US at an annualized 1.8%, missing expectations and supporting the need for another rate cut. Thus, markets are fully anticipating a 25-basis-point cut at the meeting on October 30. On the Australian side, the key inflation data coming on October 29 will be pivotal. The last Trimmed Mean CPI was 2.7%, and the market expects this new number to drop to 2.6%. This would keep inflation near the RBA’s target range of 2-3%, likely leading the RBA to maintain its current stance, which contrasts with the Fed. For those trading derivatives, this situation sets up an ideal environment for volatility strategies next week. The simultaneous releases of Australian CPI and the Fed’s rate decision will likely lead to significant price movements. We saw similar scenarios in late 2023, where conflicting data led to a spike in implied volatility on major pairs of over 15% in just one week. In this context, using a long straddle option strategy could be effective. This involves buying both a call and a put option at the same strike price, allowing traders to profit from significant price changes in either direction. Given the upcoming events, this strategy has a high chance of success. The primary risk is that if both economic releases are disappointing, the currency pair may remain stable, leading to a loss in the value of the options. For those who are bearish, especially after the recent Head-and-Shoulders pattern breakdown, purchasing put options is a clear strategy. A strike price below the key support level of 0.6480 could allow traders to benefit from a downward shift toward 0.6415. This approach offers a way to manage risk while positioning for a stronger US Dollar or a weaker Australian inflation report. Create your live VT Markets account and start trading now.

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