In October, private sector credit in Australia remained stable at 7.3% year-on-year, indicating a solid lending market. This stability shows that the economy is steady, with consistent demand for loans. Consumers continue to spend, while businesses are expanding cautiously. This balance supports the overall stability in the market. For the Reserve Bank of Australia (RBA), this steady credit growth is important as they evaluate economic indicators for future monetary policy decisions.

Economic Health Indicator

The private sector credit figures are a crucial measure of economic health. They influence government policies and shape market expectations. The consistent credit figure of 7.3% indicates that the RBA’s monetary policy over the past year is functioning well. It is managing the economy without leading to a drastic downturn. This stability decreases the immediate pressure for the RBA to change interest rates in their upcoming December meeting. We expect that the likelihood of a rate hike will lessen in the short term. For interest rate derivatives, this suggests less volatility in the coming weeks. Previously, we observed a spike in implied volatility on cash rate futures during late 2024’s inflation concerns, but this steady credit data provides a calming effect. This could be a good opportunity to explore strategies that benefit from a stable market, such as selling strangles on short-term interest rate futures.

Impact on the Australian Dollar

For the Australian dollar, this domestic data offers a stable foundation but is unlikely to trigger a significant rally. Recent data from the US shows core inflation is still high at 3.5%, meaning the spotlight will be on the Federal Reserve’s actions, which will mainly impact the AUD/USD pair. This suggests it’s wise to hedge against major moves rather than adopting a strong directional stance. In the equity market, this is a positive sign for banking and financial stocks, which closely follow credit growth. With the ASX 200 climbing 8% since the mid-2025 lows, this stability may support current valuations and reduce risks of sharp declines. We may want to use this environment to write out-of-the-money put options on the index, collecting premiums due to the lower chance of a sudden market drop driven by credit issues. Create your live VT Markets account and start trading now.

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