In the UK, GDP is expected to increase slightly in the third quarter, hinting at a slower pace of growth. At the same time, the GBP/JPY remains stable above 203.00, nearing a two-week high ahead of new UK economic data.

US Dollar Reaction

After the US government shutdown ended, the US Dollar Index rose towards 99.50. This boosted market optimism, positively affecting the bond market and overall economic sentiment. The Sui currency climbed above $2.00, benefiting from a positive trend that resulted in a 3.5% increase. This rise follows a recent dip where values dropped from $2.20 to $1.98. In Europe, market results were mixed. The FTSE 100 recorded a small loss, but the overall market sentiment remained positive. Analysts advise traders to stay updated and thoroughly research before making any financial decisions.

Australian Inflation Expectations

Australian consumer inflation expectations have dropped to 4.5%. This is an important signal, suggesting the Reserve Bank of Australia (RBA) may not need to adopt a very aggressive stance, especially after strong employment numbers. It indicates that the peak of the interest rate cycle might be nearer than the markets anticipated. However, we must note that the job market is very tight, with the unemployment rate dropping to 3.8% in the latest report for October 2025. This strength supports the Australian dollar, keeping the RBA cautious about easing policy. The central bank faces a challenge: it needs to combat inflation, which is still above the 2-3% target, while managing a strong but potentially vulnerable economy. This tension between decreasing inflation expectations and a robust job market creates an environment ripe for volatility. We think that buying options that benefit from significant price swings, like straddles on the AUD/USD, is a smart strategy for positioning ahead of a potential breakout in the coming weeks. Any strong data could lead to a sharp market movement. For those trading interest rate futures, the recent dip in inflation expectations suggests that the RBA may keep its cash rate at 4.60% through its next meeting in February 2026. We remember from the early 2020s post-pandemic period that central banks can take long pauses to assess conflicting data. This pause is not yet fully reflected in the market, presenting a potential opportunity. On the currency side, the AUD/JPY cross, which recently approached a yearly high near 101.60, appears particularly vulnerable. The new inflation data could cause this rally to stall, creating an opportunity for short positions. The attractiveness of this trade is enhanced by the Bank of Japan’s continued support of its accommodative policy. Create your live VT Markets account and start trading now.

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