Australian Dollar bulls seem hesitant on mixed CPI data; hangs near April lows vs USD

AUD/USD edges higher following the release of Australian consumer inflation figures for May.
Bulls, however, seem hesitant amid expectations that the RBA will hold interest rates steady.
The USD climbs to an over one-year high on hawkish Fed expectations and further caps the pair.

Haresh Menghani FXStreet

The AUD/USD pair attracts some buyers following the release of softer Australian consumer inflation figures during the Asian session on Wednesday and reverses a part of the previous day's slump to the 0.6900 mark, or its lowest level since early April. Spot prices currently trade around the 0.6920-0.6925 region, though any meaningful recovery seems elusive amid a bullish US Dollar (USD).

The Australian Bureau of Statistics (ABS) reported that the headline Consumer Price Index (CPI) unexpectedly eased from 4.2% YoY to 4% in May. Adding to this, the monthly CPI fell more-than-expected, by 0.7% during the reported month, following a 0.4% growth recorded in April. The softer readings, however, were offset by the Trimmed Mean CPI, which rose 0.4% on a monthly basis and picked up slightly from the 3.4% to the 3.6% YoY rate in May.

The initial market reaction, however, turns out to be muted as the US-Iran peace deal has eased concerns about the energy shock, endorsing the view that the Reserve Bank of Australia (RBA) will hold rates steady in the coming months. This, in turn, holds back traders from placing aggressive bullish bets around the Australian Dollar (USD). Apart from this, the prevalent USD buying interest further contributes to capping the upside for the AUD/USD pair.

The USD Index (DXY) has advanced to a fresh high since May 2025 amid expectations for a rate hike by the US Federal Reserve (Fed). In fact, traders upped their bets that the US central bank will raise borrowing costs by at least 25-basis-points (bps) by the year-end following the Fed's surprisingly hawkish turn last week. This offsets the optimism over the US-Iran peace deal and might continue to underpin the USD, warranting caution for AUD/USD bulls.

Economic Indicator

Trimmed Mean CPI (YoY)

The Trimmed Mean Consumer Price Index (CPI), released by the Australian Bureau of Statistics on a monthly basis, is a measure of underlying inflation. The Trimmed mean is calculated using a weighted average of percentage change from the middle 70% of the distribution of all CPI components in order to smooth the data from the more-volatile items. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.

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Global strategy 3Q 2026

With the signing of a framework agreement and subsequent negotiations between the U.S. and Iran in June, the outlook for the third quarter is favorable. Oil prices have already fallen sharply, and futures are pricing in a further decline over the course of the year. This will ease the burden on consumers and reduce uncertainty among businesses, with positive effects on the economy.

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