AUD/USD Strengthens on Hot Australian Inflation
AUD/USD Analysis
Today's data from Australia showed an acceleration in price pressures, as CPI rose to 4% y/y in May and the highest in six months. The country's central bank had appeared more worried over inflation earlier this month and policymakers had once again discussed a rate hike, even though they decide to hold at 4.35% [1]. Today's hot CPI repot strengthens prospects of a hike and a shift towards a less restrictive stance is pushed further away.
The US Fed meanwhile may be cautious towards a pivot, but markets still price in two rate cuts this year. This monetary policy divergence is beneficial for AUD/USD, which jumped after today CPI data. Above the EMA200 and having defended the pivotal 38.2% Fibonacci of the last leg up, bulls are in charge and on track for higher highs (0.6713). This would bring the 2024 highs (0.6839) in the spotlight, but this may prove elusive in the near term.
On the other hand, there is still a high bar for further tightening from the RBA and weak economic activity creates pressure for a less restrictive stance. Its US counterpart expects only one cut this year and has adopted a higher-for-longer narrative, supporting the greenback. An AUD/USD return below the EMA200 (balck line) would not be surprising, but sustained weakness is not easy given the favorable monetary policy differential and the downside is well protected technically.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 17 May 2026 https://www.rba.gov.au/media-releases/2024/mr-24-12.html |
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