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AUD/USD rises on robust inflation data, boosting RBA tightening bets

  • The Australian Dollar rises sharply after stronger January inflation data.
  • Markets reinforce expectations of further monetary tightening by the RBA.
  • The US Dollar trades in a mixed tone following the US President’s address to Congress.

AUD/USD trades around 0.7090 on Wednesday at the time of writing, up 0.42% on the day, supported by an unexpected acceleration in inflationary pressures in Australia, which revives expectations of a restrictive monetary policy stance.

Data released by the Australian Bureau of Statistics show that the Consumer Price Index (CPI) increased by 0.4% in January on a monthly basis, compared with 0.1% in December. The underlying Trimmed Mean measure rose by 0.3% over the month, after 0.2% previously. On an annual basis, the Trimmed Mean accelerated to 3.4%, above expectations and the prior 3.3% reading, while headline inflation remained steady at 3.8%, whereas a slight slowdown had been anticipated.

These figures support the hawkish stance of the Reserve Bank of Australia (RBA). At its latest meeting, the central bank raised its key interest rate by 25 basis points to 3.85% and signaled that upside risks to inflation persist. RBA Governor Michele Bullock recently stressed that price dynamics remain too strong to consider an early easing. In this context, money markets now fully price in the prospect of another rate hike in the coming months, underpinning the Australian Dollar (AUD).

According to analysts at Societe Generale, the upside surprise in inflation strengthens the case for a second 25 basis point increase and supports the continuation of the pair’s recovery. The bank notes that market pricing now reflects a higher-for-longer rate scenario in Australia.

On the US side, the US Dollar (USD) trades without a clear direction following US President Donald Trump’s address to Congress. The US Dollar Index (DXY) hovers near the 98.00 level as investors assess the impact of the President’s remarks on trade policy and the economic outlook. Attention also remains focused on evolving monetary policy expectations from the Federal Reserve (Fed) amid mixed economic data.

Overall, the monetary policy divergence between the RBA and the Fed, combined with resilient Australian inflation indicators, supports the short-term bullish momentum in AUD/USD, although caution persists in light of geopolitical and trade uncertainties.

Australian Dollar Price Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.

USDEURGBPJPYCADAUDNZDCHF
USD-0.06%-0.09%0.56%-0.05%-0.37%0.00%0.14%
EUR0.06%-0.04%0.63%0.04%-0.32%0.07%0.20%
GBP0.09%0.04%0.68%0.04%-0.28%0.10%0.23%
JPY-0.56%-0.63%-0.68%-0.60%-0.91%-0.54%-0.41%
CAD0.05%-0.04%-0.04%0.60%-0.32%0.06%0.19%
AUD0.37%0.32%0.28%0.91%0.32%0.38%0.51%
NZD-0.01%-0.07%-0.10%0.54%-0.06%-0.38%0.13%
CHF-0.14%-0.20%-0.23%0.41%-0.19%-0.51%-0.13%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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