In June, U.S. industrial production increased by 0.3% compared to May, surpassing the expected rise of 0.1%. This data provides a useful view of how the industrial sector is performing and will help in making economic forecasts. In Australia, the unemployment rate for June is expected to remain stable. The Australian Bureau of Statistics is likely to announce the creation of 20,000 new jobs, balancing out the 2,500 jobs lost in May.

Currency Exchange Movements

In the foreign exchange market, the AUD/USD recovered after three days of losses, moving above the 0.6500 level. Likewise, the EUR/USD gained strength as the US Dollar weakened, returning to the 1.1800 mark. Traders are keeping an eye on upcoming U.S. Retail Sales data. China’s GDP grew by 5.2% year-on-year in the second quarter. While trade and industrial production remain strong, challenges persist, including slowdowns in investment and retail sales, and falling property prices. Gold prices reached a three-week high of around $3,380 per troy ounce, boosted by the US Dollar’s decline and fluctuations tied to U.S. economic and political factors. Given the rise in U.S. industrial output, we believe the Federal Reserve may feel less pressure to lower interest rates soon, which could strengthen the US Dollar. Recent inflation data for May showed a lower-than-expected annual rate of 3.3%, sending mixed signals to the central bank. We are considering strategies like straddles on the S&P 500 to manage potential volatility leading up to the next Fed announcement.

Australian Economic Indicators

If Australia’s job market stays stable, it may support the Reserve Bank of Australia’s current policies, preventing sharp currency swings. The central bank’s board has reaffirmed its focus on returning inflation to target, maintaining a hawkish stance. Therefore, we see an opportunity to buy AUD/USD call options if the upcoming jobs report, due July 18, shows job growth significantly above the market’s expected 30,000. We interpret the rise of other currencies against the dollar as a sign of general bearish sentiment, making future data releases crucial. Historically, strong U.S. Retail Sales can trigger sudden reversals in currency pairs like the EUR/USD. To prepare, we are buying short-dated put options on the Euro, expecting a pullback if U.S. consumer spending exceeds expectations. China’s mixed economic signals, especially the reported 10.1% decline in property investment year-to-date as of May, pose a significant risk for commodity exporters. Given Australia’s reliance on Chinese demand, we are cautious about the continued strength of its currency. To hedge our long commodity positions, we are purchasing puts on mining-sector ETFs with significant exposure to that region. Gold prices, which recently traded around $2,330 per ounce, highlight its value as a hedge against a weakening dollar and global uncertainty. Positive data from U.S. manufacturing also supports industrial metals, with copper prices stabilizing above $4.40 per pound after a notable drop. We are maintaining long positions in gold futures and plan to buy call options on copper if factory orders remain strong. Create your live VT Markets account and start trading now.

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