The exchange rate of AUD to USD has been consolidating in a 2 cent range since the middle of January and today’s CPI inflation figures from Australia can’t really change that. The Reserve Bank of Australia remains uncertain about the start of interest rate cuts, which leaves the US dollar in charge of AUD/USD.

AUD/USD Chart H4 – The 2-Cent Range Continues

The Australian dollar has demonstrated resilience in the face of recent US dollar strength as the FED delays rate cuts, holding its ground despite the challenges. While there were expectations for a modest increase in inflation to around 3.5% year over year, the precise figure did not significantly impact market dynamics. The CPI YoY remained unchanged at 3.4% while the MoM inflation figures can be complex to interpret due to the partial updates of the overall indicator each month.

This complexity may encourage the Reserve Bank of Australia (RBA) to maintain a cautious stance, especially considering the uncertainties in the economic landscape, with the Chinese economy still in the doldrums. After today’s inflation data, the Australian dollar fell around 20 pips. Unless there is a significant downside surprise in the data, the recent trend of the Australian dollar remains intact. AUD/USD failed to push above the 400 SMA (purple) yesterday and headed for 0.65 today after the rejection and the CPI report.

Australian CPI Inflation Report for February

• Year-on-year CPI increased by 3.4%, slightly below expectations of 3.5%. This is consistent with the January CPI figure.
• Month-on-month CPI rose by 0.5%, surpassing the previous month’s increase of 0.4%.
• The ‘core’ Trimmed Mean reading showed a year-on-year increase of 3.9%, up from 3.8% in January.
• CPI excluding volatile items and holiday travel also increased by 3.9% year-on-year, down from 4.1% in January.

Overall, while the CPI inflation remained steady year-on-year at 3.4%, there was a slight uptick to 0.5% in the month-on-month figure, and core inflation measures also showed some modest increases.

AUD/USD Live Chart