The AUD/USD pair falls sharply to near 0.6220 in Wednesday’s European session. The Aussie pair faces sharp selling pressure as the Australian Dollar (AUD) weakens across the board after the release of the softer-than-projected Australian Q4 Consumer Price Index (CPI) data, which fuelled bets supporting the Reserve Bank of Australia (RBA) to start reducing interest rates from the policy meeting in February.

Australian Bureau of Statistics reported that inflationary pressures rose at a steady pace of 0.2% in the last quarter of 2024 on a sequential basis, slower than estimates of 0.3%. Compared to the same quarter of the previous year, inflation rose at a slower pace of 2.4% than expectations of 2.5% and 2.8% growth in the third quarter of 2024. However, the Monthly CPI grew at a faster pace of 2.5% in December, as expected, compared to a 2.3% increase in November, but is broadly inside the RBA’s range of 2%-3%.

Soft Australian inflation data have boosted market expectations that the RBA will pivot to policy easing at its next policy meeting.

Meanwhile, deepening fears that United States (US) President Donald Trump will impose 10% tariffs on China has also kept the Aussie Dollar on the backfoot, being Australia a leading trading partner of China. On Tuesday, White House Press Secretary Karoline Leavitt reported that the President is “very much still considering 10% tariffs on China” from February 1.

On the US Dollar (USD) front, investors await the Federal Reserve’s (Fed) monetary policy decision, which will be announced at 19:00 GMT. The Fed is widely anticipated to keep interest rates steady in the range of 4.25%-4.50%.

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