The latest CPI figures out for Australia surprised to the upside, reinforcing sticky inflation pressures in the domestic economy. Headline inflation remains well above the RBA’s 2–3% target band, and more importantly, core inflation continues to trend higher, signaling underlying demand remains firm.

This reduces the likelihood of a near-term rate cut from the Reserve Bank of Australia. In fact, if price pressures persist, the RBA may be forced to maintain a hawkish bias, or even re-open the door to further tightening. Markets, which had been pricing in cuts later this year, are now re-evaluating that path.

In contrast, the U.S. dollar is under pressure as softer U.S. data and rising expectations for Fed easing weigh on yields. The growing divergence in central bank outlooks RBA staying on hold vs. Fed likely to cut creates a supportive environment for AUD/USD upside

LONG AUDUSD

May 02 2025