AUD/USD rises as inflation jumps

The Australian dollar has extended its rally with solid gains on Wednesday. In the North American session, AUD/USD is trading at 0.7080, up 0.51%.

Australian inflation jumps to 8.4%

RBA policy makers are no doubt having a bad day at the office, as Australia’s inflation climbed sharply in the fourth quarter. CPI rose to 8.4%, up from 7.3% in Q3 and above the consensus of 7.7%. The hot inflation report will douse hopes that inflation has peaked and there’s little doubt that the RBA will have to continue raising rates. The markets had priced in a peak rate of 3.6%, but with the cash rate currently at 3.1% and more rate hikes on the way, it appears that the market is underestimating the terminal rate.

The inflation release boosted the Australian dollar around 1% and to a five-month high after the CPI report, but the Aussie has pared much of those gains. The outlook for the Aussie is looking brighter for several reasons. The RBA will almost certainly continue raising rates over the next several months, commodity prices are strong and China’s reopening will increase demand for Australian exports.

There were no major releases out of the US today, but Thursday has a crowded data calendar, with GDP, durable goods and new home sales. GDP is expected to slow to 2.8%, down from 3.2% in Q3 but still respectable. On Wednesday, US PMIs pointed to a decline in the manufacturing and services sectors, pointing to cracks in the US economy as high rates have dampened economic growth. The US dollar has been under pressure as soft US numbers have increased expectations that the Fed will ease up on rate policy due to the slowing economy. A stronger-than-expected GDP would likely provide the US dollar with a much-needed boost, while a soft GDP reading should send the US dollar lower.


AUD/USD Technical

  • AUD/USD is testing resistance at 0.7064. Above, there is resistance at 0.7160
  • 0.6968 and 0.6872 are providing support

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.