Australian building permits dropped by 8.2% in July compared to the previous month. Analysts expected a smaller drop of 4.8%. In June, permits had increased by 11.9%. In contrast, year-on-year figures showed a strong rise of 27.4%. China’s manufacturing sector improved with an S&P Global PMI of 50.5 for August, beating the expectations of 49.5. This marks the fastest growth in five months, maintaining the previous month’s score of 49.5.

Australian Private Inflation and Business Inventories

The Australian private inflation survey showed a decrease of 0.3% from the previous month, down from an increase of 0.9%. The year-on-year rate is now at 2.8%, slightly less than the previous rate of 2.9%. In Q2, Australian business inventories rose by 0.1% from the previous quarter, below the expected growth of 0.2%. The People’s Bank of China set the USD/CNY reference rate at 7.1072, lower than the estimate of 7.1281. Additionally, US tariffs have negatively affected South Korean exports, with growth slowing sharply to 1.3% in August. Asian shares fell amid uncertainties over US tariff decisions. Investors are watching US jobs data for hints about potential Federal Reserve interest rate cuts, while gold prices have risen due to dollar weakness. The Australian dollar faces challenges as domestic data is weak, whereas key trading partner China shows strength. The significant 8.2% decrease in building permits in July, coupled with soft inflation figures, suggests that Australia’s economy is slowing. However, the strong manufacturing PMI from China points to robust external demand, creating a mixed outlook.

Volatility in the Aussie Dollar

Given these circumstances, we should expect volatility in the Australian dollar. Weak domestic data combined with the Reserve Bank of Australia holding its cash rate at 3.85% since early 2025 raises the chance of a future rate cut. Traders may want to buy puts on the AUD/USD, preparing for a decline if the RBA adopts a more dovish approach. The unexpected growth in China’s manufacturing, with the PMI rising to 50.5, breaks a trend of readings below the 50-point mark. This indicates that stimulus measures from Beijing are finally taking effect, which could help support commodity prices. This strength provides a cushion for the Australian dollar, so any bearish positions should be managed carefully against this positive external factor. In the U.S., the focus is on upcoming jobs data for insights into Federal Reserve policy. With Fed funds futures currently indicating over a 60% chance of a rate cut at the next meeting, a weak jobs report could lead to further dollar weakness. There is an opportunity to buy short-term call options on gold or puts on the US Dollar Index in preparation for this scenario. The recent security breach at Google and Salesforce poses a specific risk to the technology sector, a previous market leader. After the Nasdaq 100 reached new highs in summer 2025, the sector is now vulnerable to profit-taking due to negative news. Buying protective puts on tech-heavy indices could be a smart hedge against a potential downturn in the coming weeks. Create your live VT Markets account and start trading now.

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