The AUD/USD pair is trading a bit higher, approaching 0.6500, as the US Dollar remains weak. The easing of trade tensions between the US and China has helped the Australian Dollar. This improvement was boosted by US President Trump’s comments on tariffs.

Upcoming Meeting

Trump and Chinese leader Xi Jinping are still set to meet in South Korea. Trade tensions increased after China imposed export controls on rare earth minerals, prompting the US to apply 100% tariffs on Chinese goods. Australia, which relies heavily on exports to China, is benefiting from these improved relations. As the US Dollar starts the week on a low note, all eyes are on the September US Consumer Price Index (CPI) data, which is expected to impact predictions about the Federal Reserve’s upcoming decisions on monetary policy. Currently, the market fully expects a 25-basis-point rate cut at this month’s meeting. The US Dollar is the world’s main reserve currency, influencing global markets greatly. Its strength is closely tied to Federal Reserve policies related to interest rates and inflation management. Actions such as quantitative easing and tightening directly affect the Dollar’s value and its stability in the financial world. The AUD/USD is holding steady around 0.6500 as the US Dollar shows weakness. This situation is supported by reduced US-China economic tensions and a growing belief that the Federal Reserve will cut interest rates. The market seems to be preparing for a risk-on stance, which usually benefits the Australian Dollar.

Positive Sentiment

Recent diplomatic discussions have created a positive outlook for the Australian Dollar by easing worries about new tariffs. Data from the Australian Bureau of Statistics shows that exports to China made up over 30% of Australia’s total exports in Q2 2025, making any sign of stability a significant plus. This heavy reliance on China makes the AUD very sensitive to updates from both Beijing and Washington. Meanwhile, the US Dollar is trading carefully ahead of the key inflation data for September. After the last CPI reading of 2.8% year-over-year for August, the market seeks confirmation that inflation is under control to support a shift in Federal Reserve policy. According to the CME FedWatch tool, there is an 85% chance of a 25-basis-point rate cut during the FOMC meeting on November 5th. For derivative traders, this environment suggests a bullish outlook for AUD/USD in the coming weeks. Buying call options with a strike price around 0.6550 or 0.6600 could be a smart move to take advantage of potential gains, especially if the upcoming US CPI data shows weakness. This strategy would benefit from a dovish Fed while reducing downside risk. However, one-month implied volatility for the pair is moderate, below the highs reached during the 2023 rate hike cycle. This indicates that options are reasonably priced, making them useful for hedging as well. Traders with short positions might want to buy out-of-the-money calls as a cost-effective hedge against a sudden rise following the Fed meeting. Create your live VT Markets account and start trading now.

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