Australia’s trade surplus grew to AUD 4,385 million in October, up from the revised AUD 3,707 million in September. The Australian Bureau of Statistics reported that exports rose by 3.4% month-on-month in October, while imports increased by 2.0%. The AUD/USD pair saw a 0.12% rise, trading at 0.6609. This week, the Australian Dollar strengthened against the US Dollar. Economic performance and trade data in Australia can influence the currency’s value.

The Role of the Reserve Bank of Australia

The Reserve Bank of Australia influences interest rates, which in turn affects the value of the Australian Dollar. The price of Iron Ore, a major export, and the state of the Chinese economy (Australia’s largest trading partner) also impact the AUD. The Trade Balance, reflecting the difference between exports and imports, affects the AUD. A positive balance usually strengthens the currency, while a negative balance can weaken it. Favorable market sentiment tends to boost the Australian Dollar, as it is seen as a risk currency. Economic indicators like inflation and growth rates also shape the AUD’s market performance. Recent data shows that Australia’s trade surplus has increased to AUD 4,385 million, thanks to a strong 3.4% rise in exports. This robust export sector supports the Australian Dollar, which is currently trading around 0.6609 in response to this good news.

Impact of US Market Sentiment

The strength of the Australian Dollar comes as the US Dollar is weakening, creating a positive environment for the AUD. Last month’s US Non-Farm Payrolls report showed job growth slowing to 155,000, raising expectations that the Federal Reserve might cut rates early in 2026. This difference between a stable RBA (Reserve Bank of Australia) and a potentially easing Fed should support AUD/USD in the coming weeks. We believe the Reserve Bank of Australia will view this strong trade data as a reason to postpone any interest rate cuts. They have kept the cash rate steady at 4.35% for most of 2025, and this report reduces the need for policy easing. Therefore, traders should not expect any dovish signals from the RBA soon. However, we need to monitor the situation in China, Australia’s biggest trading partner. China’s latest manufacturing PMI, released this week, was at 50.4, indicating only slight growth. This suggests a fragile recovery, posing a risk to future Australian export demand. The iron ore price, a key Australian export, has recently been strong, trading above $145 a tonne—a level not sustained since early 2024. This high price is a key driver of the strong trade surplus. As long as commodity prices remain high, they will support the currency. For derivative traders, this presents an opportunity to cautiously position for further gains in AUD/USD. Buying call options with a strike price near the 0.6665 resistance level could be a smart strategy. This allows traders to benefit from a rising Australian Dollar while managing their maximum risk. To protect against downside risk, traders might consider purchasing put options with a strike price below the 0.6532 support level. This serves as a hedge in case Chinese economic data disappoints or if market sentiment shifts unexpectedly, protecting long positions from a sudden currency downturn. Create your live VT Markets account and start trading now.

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