The Australian Dollar (AUD) edged higher against the US Dollar (USD), with the AUD/USD pair approaching 0.7130 during the early Asian session on Thursday. This upward movement was driven by hotter-than-expected domestic inflation data, as traders awaited the release of Chinese Purchasing Managers Index (PMI) figures later in the day, which are anticipated to influence the China-proxy Aussie [1].
Australia’s Consumer Price Index (CPI) rose by 4.6% year-over-year in March, up from a 3.7% increase previously, according to the Australian Bureau of Statistics. Although this figure was slightly below the 4.7% forecast, it remains well above the Reserve Bank of Australia’s (RBA) target range, maintaining pressure on the central bank to consider further rate hikes. The monthly CPI for March was 1.1%, compared to 0% in the prior reading [1].
On the US side, the Federal Open Market Committee (FOMC) voted 8-4 to hold rates in a range of 3.5% to 3.75%, marking the first time since October 1992 that four FOMC members dissented. The committee cited elevated inflation, partly due to recent increases in global energy prices. Fed Chair Jerome Powell stated he would continue serving as a Fed governor after his chairmanship ends, with Kevin Warsh, nominated by Trump, expected to succeed him [1].
The market is closely watching the upcoming Chinese PMI data, as China is Australia’s largest trading partner and the health of the Chinese economy significantly impacts the AUD. The elevated Australian inflation data has provided support for the AUD, as it increases the likelihood of further RBA tightening, while global risk sentiment and US monetary policy developments also remain influential factors [1].
CONCLUSION
The Australian Dollar gained ground against the US Dollar following higher-than-expected inflation data, which keeps pressure on the RBA to consider rate hikes. Market participants are now focused on the upcoming Chinese PMI releases, which could further influence the AUD’s direction. Overall, the AUD remains supported by domestic inflation and expectations of tighter monetary policy.