AUD/NZD holds near long-term highs above 1.2200 amid hot Australian CPI

AUD/NZD hit fresh 13-year highs at 1.2230, before pulling back to levels right above 1.2200.
Australian CPI surged in March, fuelled by higher Oil prices amid Iran's war.
These figures have boosted hopes of an RBA rate hike at next week's meeting.

Guillermo Alcala FXStreet

The Australian Dollar (AUD) ticks up against the New Zealand Dollar (NZD) on Wednesday, extending its rally to 1.2230 for the first time since April 2013, before pulling back to levels near 1.2200 at the time of writing. The pair has been boosted by Australian inflation figures, which add pressure to the Reserve Bank of Australia (RBA) to hike interest rates at next week’s meeting.

Data from the Australian Bureau of Statistics released earlier on Wednesday showed that consumer inflation, as measured by the Consumer Price Index (CPI), surged to a 4.6% year-on-year pace in March, up from 3.7% in February, boosted by the rally in energy prices triggered by the war in Iran.

Inflation jumps above the RBA's target

Consumer prices accelerated 1.1% on the month in March, following a flat performance in February. The Trimmed Mean CPI witnessed a more moderate advance, by 0.3% in March from 0.2% in February, while the yearly rate remained growing at a steady 3.3% rate, unchanged from the previous month but above the RBA’s 3% limit of the target band for inflation.

These figures have boosted market expectations of upcoming RBA interest rate hikes, which meet on May 5. Governor Michelle Bullock affirmed last week that interest rates will rise again if inflation "becomes entrenched", but suggested that the timing was still unclear. These figures, however, might have prompted committee members to act fast.

In New Zealand, the focus on Wednesday will be on the conference of the Reserve Bank of New Zealand (RBNZ) Governor, Anna Breman, who might provide further clues about the bank’s rate path. Markets are increasingly pricing an interest rate hike in July.

Economic Indicator

Consumer Price Index (MoM)

The Monthly Consumer Price Index (CPI), released by theAustralian Bureau of Statistics on a monthly basis, measures the changes in the price of a comprehensive basket of goods and services acquired by household consumers. The MoM reading compares prices in the reference month to the previous one. A high reading is seen as bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.

Economic Indicator

Consumer Price Index (YoY)

The Consumer Price Index (CPI), released by the Australian Bureau of Statistics on a monthly basis, measures the changes in the price of a comprehensive basket of goods and services acquired by household consumers. The indicator is the primary measure of headline inflation after a new methodology was applied to transition from quarterly to monthly readings, applying to data from April 2024 onwards. The YoY reading compares prices in the reference month to the same month a year earlier. A high reading is seen as bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.

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