The Kansas City Federal Reserve is set to host the 45 th Annual Symposium at Jackson Hole Lodge in Wyoming’s Grand Teton National Park. Some of the countries and world’s most important central bankers, economists, and academics will be meeting to discuss the biggest issues facing the global economy. The key issue on the agenda is of “Reassessing Constraints on the Economy and Policy.” All eyes will be on Jerome Powell, with the chairman of the Federal Reserve expected to speak on Thursday and provide an update on the proceedings of the conference.
At last year’s event Powell was caught out after stating that inflation was transitory, only to see it become a huge long-lasting issue. Therefore, he may try and correct this perception and portray a much more conservative attitude. There is also a view from some analysts that the Fed came across too dovish in the July meeting which led to the market rally.
At this stage the market has priced in a 75-bps increase at the September meeting, however this may change. With key inflation measures slowing somewhat, the question will be whether the fed continue its aggressive interest rate hikes or eases their policy to avoid a potential recession. The market will be hoping that Powell provides some clues for what the Fed plans to do after rates peak.
They will be hoping for clarity over whether the bank will hold the rates at the high levels for some time or lower them straight away to avoid a recession. Market participants should be weary that although Jackson Hole may provide some important context to the future rates, no official policies will be set. The conference will most likely have a relatively small impact on the market, it still has the potential to provide some volatility for both equities and currency if significant attitude shifts are expressed.
The USD is currently at 5 year highs and with some positive catalysts for the currency, it may continue to rise further if the Fed continues to be aggressive in its rate hikes.
By
GO Markets
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The torch is lit in Milan, and public attention has moved from the opening-ceremony theatrics to the competition on the slopes.
But for forex (FX) traders, eyes are still on the euro (EUR) charts. With Italy at the centre of the sporting world, the eurozone economy is facing one of its most-watched moments of the year.
1. The home court advantage (Italy’s economy)
Some estimates suggest the Olympics could deliver roughly a €5.3 billion boost to the Italian economy, driven by direct spending and a longer tourism tail once the flame goes out. In practical terms, that can mean a front-loaded “direct expenditure” phase. Hospitality, retail and transport demand can peak as an estimated 2.5 million spectators move between Milan and the Dolomites.
Checklist task: Watch Italy industrial production (Wednesday, 11 February 2026). While the Games may support services activity, it’s worth tracking whether broader production data is keeping pace or if the Olympic impact is narrowly concentrated in tourism‑linked sectors.
At its 5 February meeting, the European Central Bank (ECB) held policy settings steady at 2.15% and the deposit facility at 2.00%. President Christine Lagarde signalled that while inflation appears to be stabilising, the ECB remains in “wait and see” mode.
Checklist task: Monitor speeches from ECB members this week. Any shift in tone, including a more hawkish tilt that suggests rates may stay higher for longer, could act as a potential tailwind for EUR/USD, especially if it contrasts with a more cautious Federal Reserve tone.
The most prestigious Olympic finals often land in the European evening. For traders, this lines up with the London to New York session overlap (typically 14:00 to 17:00 GMT). That’s when liquidity is deepest in EUR crosses and when positioning can whipsaw around data and headlines.
Checklist task: Expect possible peak liquidity and the potential for “false breakouts” during these hours. If a major US data point (such as Tuesday’s retail sales, or Friday’s CPI) lands while European markets are still open, EUR pairs may see a volatility pickup.
While the euro is the star of the show, the Olympics can still be shadowed by broader geopolitical noise. For example, gold is already trading around the US$5,000 mark after briefly breaking above it in early February, driven by central‑bank buying, expectations of a weaker dollar, and upgraded year‑end forecasts.
Checklist task: If sentiment turns risk-off, watch traditional haven assets such as the Swiss franc (CHF) and gold. Gold has seen large swings recently and is currently testing resistance near US$5,000. EUR/CHF may also see higher volatility if geopolitical headlines intensify during the Games.
The week wraps with the eurozone’s Q4 GDP (second estimate) on Friday, 13 February 2026.
Checklist task: The preliminary estimate showed 0.3% growth. If the figure is revised upward, it may reinforce the eurozone’s resilience and could support a late-week bid in EUR.
While the “Olympic boost” may offer a sentiment cushion for Italy, the euro’s direction is still likely to be shaped by whether the ECB’s “wait and see” stance is challenged by Friday’s GDP update or Wednesday’s industrial production release.
With gold hovering near US$5,000 and the US facing a calendar affected by rescheduled data, volatility could stay elevated into key overlap hours, right as prime-time events are taking place.
February’s FX landscape is likely to be driven by inflation persistence, labour resilience, and central bank communications. With several high-impact data releases across the US, Europe, Japan and Australia, near-term moves may be more event-driven and repricing-led, rather than trend-led.
Quick facts
USD remains the key reference point, with US data driving repricing in yields and the broader FX market.
EUR sensitivity remains high around European Central Bank (ECB) messaging and incoming inflation and activity signals.
JPY remains tightly linked to domestic data and Bank of Japan (BOJ) communication, with USD/JPY often reacting sharply to shifts in yield expectations.
AUD remains policy sensitive, with domestic inflation and labour data likely to matter most, alongside global risk tone and metals.
US dollar (USD)
Key events
Nonfarm payrolls (NFP) and unemployment: 8:30 am, 11 February (ET) | 12:30 am, 12 February (AEDT)
Consumer Price Index (CPI), headline and core: 8:30 am, 13 February (ET) | 12:30, 13 February (AEDT)
Personal income and outlays (includes the PCE price index): 8:30, 20 February (ET) | 12:30, 21 February (AEDT)
What to watch
The USD is likely to remain primarily driven by shifts in inflation and labour data and their implications for Federal Reserve rate expectations. Recent headlines surrounding Federal Reserve independence have also added volatility to USD positioning.
Stronger inflation or labour resilience is often associated with firmer USD support via higher yield expectations. Softer outcomes could reduce rate support and allow pairs like EUR/USD and AUD/USD to stabilise.
ECB flash estimates for GDP and employment: 8:00 pm, 13 February (AEDT)
What to watch
EUR direction remains linked to whether the ECB can maintain its stance without a material deterioration in activity, or whether inflation and growth data pull forward easing expectations.
Resilient growth and firm inflation could support the “higher for longer” pricing bias. Weaker growth or softer inflation could weigh on the currency, particularly if they bring forward easing expectations.
Japan preliminary GDP (Q4 2025, first preliminary): 6:50 pm, 15 February (ET) | 10:50 am, 16 February (AEDT)
National CPI (Japan): 20 February (Japan)
What to watch
JPY remains sensitive to domestic yield shifts and BOJ communication. Even modest adjustments to policy expectations could generate outsized moves in USD/JPY.
Firm growth or inflation outcomes could support JPY via higher domestic yields and shifting BOJ expectations. Softer outcomes or cautious policy messaging could keep USD/JPY supported.
Consumer Price Index (CPI): 11:30 am, 25 February (AEDT)
What to watch
AUD remains sensitive to policy, responding quickly to domestic inflation and labour data, as well as global risk sentiment and its impact on metal pricing.
Persistent wages or inflation pressures could support AUD via firmer policy expectations. Softening data could reduce rate support and weigh on AUD performance, particularly versus USD and JPY.
For over 110 years, the Federal Reserve (the Fed) has operated at a deliberate distance from the White House and Congress.
It is the only federal agency that doesn’t report to any single branch of government in the way most agencies do, and can implement policy without waiting for political approval.
These policies include interest rate decisions, adjusting the money supply, emergency lending to banks, capital reserve requirements for banks, and determining which financial institutions require heightened oversight.
The Fed can act independently on all these critical economic decisions and more.
But why does the US government enable this? And why is it that nearly every major economy has adopted a similar model for their central bank?
The foundation of Fed independence: the panic of 1907
The Fed was established in 1913 following the Panic of 1907, a major financial crisis. It saw major banks collapse, the stock market drop nearly 50%, and credit markets freeze across the country.
At the time, the US had no central authority to inject liquidity into the banking system during emergencies or to prevent cascading bank failures from toppling the entire economy.
J.P. Morgan personally orchestrated a bailout using his own fortune, highlighting just how fragile the US financial system had become.
The debate that followed revealed that while the US clearly needed a central bank, politicians were objectively seen as poorly positioned to run it.
Previous attempts at central banking had failed partly due to political interference. Presidents and Congress had used monetary policy to serve short-term political goals rather than long-term economic stability.
So it was decided that a stand-alone body responsible for making all major economic decisions would be created. Essentially, the Fed was created because politicians, who face elections and public pressure, couldn’t be relied upon to make unpopular decisions when needed for the long-term economy.
Although the Fed is designed to be an autonomous body, separate from political influence, it still has accountability to the US government (and thereby US voters).
The President is responsible for appointing the Fed Chair and the seven Governors of the Federal Reserve Board, subject to confirmation by the Senate.
Each Governor serves a 14-year term, and the Chair serves a four-year term. The Governors' terms are staggered to prevent any single administration from being able to change the entire board overnight.
Beyond this “main” board, there are twelve regional Federal Reserve Banks that operate across the country. Their presidents are appointed by private-sector boards and approved by the Fed's seven Governors. Five of these presidents vote on interest rates at any given time, alongside the seven Governors.
This creates a decentralised structure where no single person or political party can dictate monetary policy. Changing the Fed's direction requires consensus across multiple appointees from different administrations.
The case for Fed independence: Nixon, Burns, and the inflation hangover
The strongest argument for keeping the Fed independent comes from Nixon’s time as president in the 1970s.
Nixon pressured Fed Chair Arthur Burns to keep interest rates low in the lead-up to the 1972 election. Burns complied, and Nixon won in a landslide. Over the next decade, unemployment and inflation both rose simultaneously (commonly referred to now as “stagflation”).
By the late 1970s, inflation exceeded 13 per cent, Nixon was out of office, and it was time to appoint a new Fed chair.
That new Fed chair was Paul Volcker. And despite public and political pressure to bring down interest rates and reduce unemployment, he pushed the rate up to more than 19 per cent to try to break inflation.
The decision triggered a brutal recession, with unemployment hitting nearly 11 per cent.
But by the mid-1980s, inflation had dropped back into the low single digits.
Pre-Volcker era inflation vs Volcker era inflation | FRED
Volcker stood firm where non-independent politicians would have backflipped in the face of plummeting poll numbers.
The “Volcker era” is now taught as a masterclass in why central banks need independence. The painful medicine worked because the Fed could withstand political backlash that would have broken a less autonomous institution.
Are other central banks independent?
Nearly every major developed economy has an independent central bank. The European Central Bank, Bank of Japan, Bank of England, Bank of Canada, and Reserve Bank of Australia all operate with similar autonomy from their governments as the Fed.
However, there are examples of developed nations that have moved away from independent central banks.
In Turkey, the president forced its central bank to maintain low rates even as inflation soared past 85 per cent. The decision served short-term political goals while devastating the purchasing power of everyday people.
Argentina's recurring economic crises have been exacerbated by monetary policy subordinated to political needs. Venezuela's hyperinflation accelerated after the government asserted greater control over its central bank.
The pattern tends to show that the more control the government has over monetary policy, the more the economy leans toward instability and higher inflation.
Independent central banks may not be perfect, but they have historically outperformed the alternative.
Turkey’s interest rates dropped in 2022 despite inflation skyrocketing
Why do markets care about Fed independence?
Markets generally prefer predictability, and independent central banks make more predictable decisions.
Fed officials often outline how they plan to adjust policy and what their preferred data points are.
Currently, the Consumer Price Index (CPI), Personal Consumption Expenditures (PCE) index, Bureau of Labor Statistics (BLS) monthly jobs reports, and quarterly GDP releases form expectations about the future path of interest rates.
This transparency and predictability help businesses map out investments, banks to set lending rates, and everyday people to plan major financial decisions.
When political influence infiltrates these decisions, it introduces uncertainty. Instead of following predictable patterns based on publicly released data, interest rates can shift based on electoral considerations or political preference, which makes long-term planning more difficult.
The markets react to this uncertainty through stock price volatility, potential bond yield rises, and fluctuating currency values.
The enduring logic
The independence of the Federal Reserve is about recognising that stable money and sustainable growth require institutions capable of making unpopular decisions when economic fundamentals demand them.
Elections will always create pressure for easier monetary conditions. Inflation will always tempt policymakers to delay painful adjustments. And the political calendar will never align perfectly with economic cycles.
Fed independence exists to navigate these eternal tensions, not perfectly, but better than political control has managed throughout history.
That's why this principle, forged in financial panics and refined through successive crises, remains central to how modern economies function. And it's why debates about central bank independence, whenever they arise, touch something fundamental about how democracies can maintain long-term prosperity.
Markets move into the week ahead with inflation data across Australia and Japan, alongside elevated geopolitical tensions that continue to influence energy prices and broader risk sentiment.
Australia Consumer Price Index (CPI): Inflation data may influence the Reserve Bank of Australia (RBA) policy path, with the Australian dollar (AUD) and local yields sensitive to any surprise.
Japan data cluster: Tokyo CPI (preliminary) plus industrial production and retail sales provide an inflation-and-activity pulse that could shape Bank of Japan (BoJ) normalisation expectations.
Eurozone & Germany CPI: Flash inflation readings will test the disinflation narrative and influence ECB rate-cut timing expectations.
Oil and geopolitics: Brent crude has posted its highest close since 8 August 2025 amid renewed Middle East tensions, reinforcing energy-driven inflation risk.
Australia CPI: RBA expectations to change?
Australia’s upcoming CPI release will be closely watched for signals on whether inflation is stabilising or proving more persistent than expected.
A stronger-than-expected print could be associated with higher yields and a firmer AUD as rate expectations adjust. A softer outcome could support expectations for a steadier policy stance.
Key dates
Inflation Rate (MoM): 11:30 am Wednesday, 25 February (AEDT)
Japan’s late-week releases combine Tokyo CPI (preliminary) with industrial production and retail sales, offering a broader read on price pressures and domestic demand.
Tokyo CPI is often watched as a timely signal for national inflation dynamics and BoJ debate. Industrial output and retail spending add context on activity.
Surprises across this cluster can drive sharp moves in the JPY, particularly if results shift perceptions around the pace and persistence of BoJ normalisation.
Key dates
Tokyo CPI: 10:30 am Friday, 27 February (AEDT)
Industrial Production: 10:50 am Friday, 27 February (AEDT)
Retail Sales: 10:50 am Friday, 27 February (AEDT)
Monitor
JPY sensitivity to inflation surprises
Bond yield moves in response to activity data
Equity reactions if growth momentum expectations shift
Energy and safe-haven flows
Oil prices have climbed to their highest close since 8 August 2025 amid renewed Middle East tensions.
Recent reporting on heightened regional military activity and shipping-risk headlines near the Strait of Hormuz has reinforced energy security as a market focus. The Strait of Hormuz remains a widely watched chokepoint for global energy flows.
Higher oil prices can feed into inflation expectations and influence bond yields. At the same time, geopolitical uncertainty can support the USD through safe-haven demand and relative rate positioning.
Flash inflation readings from Germany and the broader eurozone (HICP) will test whether the region’s disinflation trend remains intact.
Germany’s release can influence expectations ahead of the aggregated eurozone figure. If core inflation proves sticky, expectations around the timing and pace of potential European Central Bank easing could shift.
Key dates
Germany Inflation Rate: 12:00 am Saturday, 28 February (AEDT)
From tech disruptors to defence contractors, some of the market's most talked-about companies start their public journey through an initial public offering (IPO). For traders, these initial public listings can represent a unique trading environment, but also a period of heightened uncertainty.
Quick facts
An IPO is when a private company lists its shares on a public stock exchange for the first time.
IPOs can offer traders early access to high-growth companies, but come with elevated volatility and limited price history.
Once listed, traders can gain exposure to IPO stocks through direct share purchases or derivatives such as contracts for difference (CFDs).
What is an initial public offering (IPO)?
An IPO is when a company offers its shares to the public for the first time.
Before performing an IPO, shares in the company are typically only held by founders, early employees, and private investors. Going public makes the shares available to be purchased by anyone.
Depending on the size of the company, it will usually list its public shares on the local stock exchange (for example, the ASX in Australia). However, some large-valuation companies choose to only list on a global stock exchange, like the Nasdaq, no matter where their main headquarters is located.
For traders, IPOs are generally the first opportunity to gain exposure to a company’s stock. They can create a unique environment with increased volatility and liquidity, but also carry heightened risk, given the limited price history and sensitivity to sentiment swings.
Why do companies go public?
The biggest driver to perform an IPO is to access more capital. Listing on a public exchange means the company can raise significant funds by selling shares.
It also provides liquidity for existing shareholders. Founders, early employees, and private investors often sell a portion of their existing holdings on the open market, realising the returns on their years of support.
Beyond the monetary benefits, going public means companies can use their stock as currency for acquisitions and offer equity-based compensation to attract talent. And a public valuation provides a transparent benchmark, which is useful for strategic positioning and future fundraising.
However, it does come with trade-offs. Public companies must comply with ongoing disclosure and reporting obligations, and pressure from public shareholders can become a barrier to long-term progress if many are focused on short-term performance.
While the specifics vary by jurisdiction, going from a private company to a public listing generally involves the following stages:
1. Preparation
The company first selects the underwriter (typically an investment bank) to manage the offering. Together, they assess the company's financials, corporate structure, and market positioning to determine the best approach for going public. It is the heavy planning stage to make sure the company is actually ready to go public.
2. Registration
Once everything is prepared, the underwriters conduct a thorough due diligence check and then lodge the required disclosure documents with the relevant regulator. These documents give a detailed disclosure to the regulator about the company, its management, and its proposed offering. In Australia, this is typically a prospectus lodged with ASIC; in the US, a registration statement filed with the SEC.
3. Roadshow
Executives at the company and underwriters will then present the investment case to institutional investors and market analysts in a “roadshow”. This showcase is designed to gauge demand for the stock and help generate interest. Institutional investors can register their interest and valuation of the IPO, which helps inform the initial pricing.
4. Pricing
Based on feedback from the roadshow and current market conditions, the underwriters set the final share price and determine the number of shares to be issued. Shares are allocated on the ‘primary market’ to investors participating in the offer (before the stock is listed publicly on the secondary market). This process sets the pre-market price, which effectively determines the company’s initial public valuation.
5. Listing
On listing day, the company’s shares begin trading on the chosen stock exchange, officially opening the secondary market. For most traders, this is the first point at which they can trade the stock, either directly or through derivatives such as Share CFDs.
6. Post-IPO
Once listed, the company becomes subject to strict reporting and disclosure requirements. It must communicate regularly with shareholders, publish its financial results, and comply with the governance standards of the exchange on which it is listed.
IPO risks and benefits for traders
How do traders participate in IPOs?
For most traders, participating in an IPO comes once shares have listed and begun trading on the secondary market.
Once shares are live on the exchange, investors can buy the physical shares directly through a broker or online exchange, or they can use derivatives such as Share CFDs to take a position on the price without owning the underlying asset.
The first few days of IPO trading tend to be highly volatile. Traders should ensure they have taken appropriate risk management measures to help safeguard against potential sharp price swings.
The bottom line
IPOs mark when a company becomes investable to the public. They can offer early access to high-growth companies and create a unique trading environment driven by elevated volatility and market interest.
For traders, understanding how the process works, what drives pricing and post-IPO performance, and how to weigh potential rewards against the risks of trading newly listed shares is essential before taking a position.
2026 is not giving investors much breathing room. It seems markets may have largely moved past the idea that rate cuts are just around the corner and into a year where inflation may prove harder to control than many expected.
Goods inflation has picked up, while services inflation remains relatively sticky due to ongoing labour cost pressures. Housing costs, particularly rents, also remain a key source of inflation pressure.
The RBA is trying to stay credible on inflation without pushing the economy too far the other way.
Key data
CPI is still around 3.8 per cent (above target), wages are still rising at about 0.8 per cent over the quarter, and unemployment is around 4.1 per cent.
Based on market-implied pricing, rate hikes are not expected soon, so the way the RBA explains its decision can matter almost as much as the decision itself. If the tone shifts expectations, those expectations can move markets.
What this playbook covers
This is a playbook for RBA-heavy weeks in 2026. It covers what to watch across sectors, lists the key triggers, and explains which indicators may shift sentiment.
1. Banks and financials: how RBA decisions flow through to lending and borrowers
Banks are where the RBA shows up fastest in the Australian economy. Rates can hit borrowers quickly and feed into funding costs and sentiment.
In tighter phases, margins can improve at first, but that can flip if funding costs rise faster, or if credit quality starts to weaken. The balance between those forces is what matters most.
If banks rally into an RBA decision week, it may mean the market thinks higher for longer supports earnings. If they sell off, it may mean the market thinks higher for longer hurts borrowers. You can get two different readings from the same headline.
What to watch
The yield curve shape: A steeper curve can help margins, while an inverted curve can signal growth stress.
Deposit competition: It can quietly squeeze margins even when headline rates look supportive.
RBA wording on financial stability, household buffers, and resilience. Small phrases can shift the risk story.
Potential trigger
If the RBA sounds more hawkish than expected, banks may react early as markets reassess growth and credit risk expectations. The first move can sometimes set the tone for the session.
Key risks
Funding costs rising faster than loan yields: May point to margin pressure.
Clear tightening in credit conditions: Rising arrears or refinancing stress can change the narrative quickly.
Financials are the biggest sector in the S&P/ASX 200 index | S&P Global
2. Consumer discretionary and retail: where higher rates hit household spending
When policy is tight, consumer discretionary becomes a live test of household resilience. This is where higher everyday costs often show up fastest.
Big calls about the consumer can look obvious until the data stops backing them up. When that happens, the narrative can shift quickly.
What to watch
Wages versus inflation: The real income push or drag.
Early labour signals: Hours worked can soften before unemployment rises.
Reporting season clues: Discounting, cost pass-through, and margin pressure can indicate how stretched demand really is.
Potential trigger
If the tone from the RBA is more hawkish than expected, the sector may be sensitive to rate expectations. Any initial move may not persist, and subsequent price action can depend on incoming data and positioning
Key risks
A fast turn in the labour market.
New cost-of-living shocks, especially energy or housing, that hit spending quickly.
3. Resources: what to watch when tariffs, geopolitics, and policy shift
Resources can act as a read on global growth, but currency moves and central bank tone can change how that story lands in Australia.
In 2026, tariffs and geopolitics could also create sharper headline moves than usual, so gap risk can sit on top of the normal cycle.
The RBA still matters through two channels: the Australian dollar and overall risk appetite. Both can reprice the sector quickly, even when commodity prices have not moved much.
What to watch
The global growth pulse: Industrial demand expectations and China-linked signals.
The Australian dollar: The post-decision move can become a second driver for the sector.
Sector leadership: How resources trade versus the broader market can signal the current regime.
Potential trigger
If the RBA tone turns more restrictive while global growth stays stable, resources may hold up better than other parts of the market. Strong cash flows can matter more, and the real asset angle can attract buyers.
Key risks
In a real stress event, correlations can jump, and defensive positioning can fail.
If policy tightens into a growth scare, the cycle can take over, and the sector can fade quickly.
Materials (resources) have outperformed other ASX sectors YoY | Market Index
4. Defensives, staples, and quality healthcare
Defensives are meant to be the calmer corner of the market when everything else feels messy. In 2026, they still have one big weakness: discount rates.
Quality defensives can draw inflows when growth looks shaky, but some defensive growth stocks still trade like long-duration assets. They can be hit when yields rise, even if the business looks solid. That means earnings may be steady while valuations still move around.
What to watch
Relative strength: How defensives perform during RBA weeks versus the broader market.
Guidance language: Comments on cost pressure, pricing power, and whether volumes are holding up.
Yield behaviour: Rising yields can overpower the quality bid and push multiples down.
Potential trigger
If the RBA sounds hawkish and cyclicals start to wobble, defensives can attract relative inflows, but that can depend on yields staying contained. If yields rise sharply, long-duration defensives can still de-rate.
Key risks
Cost inflation that squeezes margins and weakens the defensive story.
Healthcare has underperformed vs S&P/ASX 200 since the end of the pandemic | Market Index
5. Hard assets, gold, and gold equities
In 2026, hard assets may be less about the simple inflation-hedge story and more about tail risk and policy uncertainty.
When confidence weakens, hard assets often receive more attention. They are not driven by one factor, and gold can still fall if the main drivers run against it.
What to watch
Real yield direction: Shapes the opportunity cost of holding gold.
US dollar direction: A major pricing channel for gold.
Gold equities versus spot gold: Miners add operating leverage, and they also add cost risk.
Potential trigger
If the market starts to question inflation control or policy credibility, the hard-asset narrative can strengthen. If the RBA stays restrictive while disinflation continues, gold can lose urgency, and money can rotate into other trades.
Key risks
Real yields rising significantly, which can pressure gold.
Crowding and positioning unwinds that can cause sharp pullbacks.
S&P/ASX All Ordinaries Gold vs Spot Gold (XAUUSD) 5Y-chart | TradingView
6. Market plumbing, FX, rates volatility, and dispersion
In some RBA weeks, the first move shows up in rates and the Australian dollar, and equities follow later through sector rotation rather than a clean index move.
When guidance shifts, the RBA can change how markets move together. You can end up with a flat index while sectors swing hard in opposite directions.
What to watch
Front-end rates: Repricing speed right after the decision can reveal the real surprise.
AUD reaction: Direction and follow-through often shape the next move in equities and resources.
Implied versus realised volatility: Can show whether the market paid too much or too little for the event.
Options skew: Can reflect demand for downside protection versus upside chasing.
Early tape behaviour: The first 5 to 15 minutes can be messy and can mean-revert.
Potential trigger
If the decision is expected but the statement leans hawkish, the front end may reprice first, and the AUD can move with it. Realised volatility can still jump even if the index barely moves, as the market rewrites the path and rotates positions under the surface.
Key risks
A true surprise that overwhelms what options implied and creates gap moves.
Competing macro headlines that dominate the tape and drown out the RBA signal.
Thin liquidity that creates false signals, whipsaw, and worse execution than models assume.
Australian interest rate and exchange rate volatility 1970-2020 | RBA
7. Theme baskets
Theme baskets may let traders express a macro regime while reducing single-name risk. They also introduce their own risks, especially around events.
What to watch
What the basket holds: Methodology, rebalance rules, hidden concentration.
Liquidity and spreads: Especially around event windows.
Tracking versus the narrative: Whether the “theme” behaves like the macro driver.
Potential trigger
If RBA language reinforces a “restrictive and uncertain” regime, theme baskets tied to value, quality, or hard assets may attract attention, particularly if broad indices get choppy.
Key risks
Theme reversal when macro expectations shift.
Liquidity risk around event windows, where spreads can widen materially.
The point of this playbook is not to predict the exact headline; it is to know where the second-order effects usually land, and to have a short checklist ready before the decision hits.
Keeping these triggers and risks in view may help some traders structure their monitoring around RBA decisions throughout 2026.
FAQs
Why does “tone” matter so much in 2026?
Because markets often pre-price the decision. The incremental information is guidance on whether the RBA sounds comfortable, concerned, or open to moving again.
What are the fastest tells right after a decision?
Some traders look to front-end rates, the AUD, and sector leadership as early indicators, but these signals can be noisy and influenced by positioning and liquidity.
Why are REITs called duration trades?
Because a large part of their valuation can be sensitive to discount rates and funding costs. When yields move, valuations can reprice quickly.
Are defensives always safer around the RBA?
Not always. If yields jump, long-duration defensives can still be repriced lower even with stable earnings.
Why do hard assets keep showing up in 2026 narratives?
Because they can act as a hedge when trust in policy credibility wobbles, but they also carry crowding and real-yield risks.
