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AUD/USD: Aussie Inflation and RBA Policy Speculation
Since last week’s RBA rate cut, the AUD/USD pair climbed to a high of $0.64081 on February 21 but later dropped below $0.64. Significantly, the pair revisited the $0.64 level for the first time since December 2024.
Strong Australian labor market data tempered expectations for a second RBA rate cut, fueling Aussie dollar demand.
This week, the Aussie Monthly CPI Indicator, out on February 26, will be crucial for near-term AUD/USD trends. Economists forecast the Monthly CPI Indicator to show inflation holding steady at 2.5% in January. An unexpected rise in inflation could challenge the RBA’s optimism that underlying inflation is moving toward the mid-point of its 2-3% target range.
The next RBA Monetary Policy Board Meeting will occur on March 31 and April 1. Last week, RBA Governor Michele Bullock highlighted several factors that could justify further rate cuts, stating:
“A slowdown in wage growth, disinflation in market services, a sustained decline in housing costs, and a partial recovery in supply-side conditions could support another rate cut.”
However, while Governor Bullock downplayed the chances of consecutive rate cuts, some market participants think otherwise. Real estate influencer Tom Panos commented:
“According to Louis Christopher, one of Australia’s most recognised and respected property analysts, history shows us that when the RBA moves on rates, they rarely stop at just one. It’s a pattern – not a one-off. With their next meeting on April 1st (yes, April Fool’s Day), there’s a real chance we will see another cut.”
Increased speculation about another RBA rate cut could weigh on AUD/USD, potentially pulling the pair below the $0.63 level.
For a comprehensive analysis of AUD/USD trends and trade data insights, visit our detailed reports here.
Australian Dollar Daily Chart
In the US session, better-than-expected US data could dampen Fed rate cut bets. A widening in the US-Aussie interest rate differential, favoring the US dollar, could drag the AUD/USD pair toward $0.63.
Conversely, following Friday’s US Services PMI drop below 50, softer data could boost expectations for an H1 2025 Fed rate cut. A narrower interest rate differential may drive the AUD/USD pair through $0.64 to target the 200-day EMA.
Beyond the US data, traders should monitor US tariff developments. With a trade-to-GDP ratio exceeding 50%, sweeping US tariffs could affect Aussie exports, its economy, and Aussie dollar demand.
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