Australian Dollar Gains As RBA Signals Inflation Concerns

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The Australian Dollar (AUD) advances against the US Dollar (USD) on Friday after posting losses of more than 0.5% in the previous session. Still, AUD/USD may find support from cautious sentiment surrounding the Reserve Bank of Australia (RBA) policy outlook.

RBA Assistant Governor Sarah Hunter said she expects the labor market to remain tight and inflation to stay above target for some time, adding that she is closely monitoring capacity constraints across the economy and labor market.

RBA Governor Michele Bullock reiterated that the Board stands ready to raise rates further if inflation proves persistent, emphasizing that any inflation “with a three in front of it” would be unacceptable. She stressed that policy decisions will remain data-dependent, with forecasts continually reassessed.

Australia’s Consumer Inflation Expectations rose to 5.0% in February from 4.6%, ending seven consecutive months below 5%. The broad-based increase supports the RBA Board’s decision to lift the cash rate target to 3.85%.

Traders now turn to the January Consumer Price Index (CPI) report from the United States (US). Headline inflation is expected to ease to 2.5% from 2.7%, while core inflation is seen moderating to 2.5% from 2.6%. A softer reading could open the door for the Federal Reserve to resume rate cuts after pausing at its first meeting of the year.

Markets are pricing in two Federal Reserve rate cuts this year, with the first likely in the second half following stronger-than-expected January jobs data. However, uncertainty lingers over potential changes to the Federal Reserve’s balance sheet ahead of Kevin Warsh’s expected Chairmanship in May. Warsh has previously opposed asset purchases but recently indicated openness to coordinating with the Treasury to help ease yields.

Australian Dollar Price Today
 

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.
 

 

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