AUD Softens After CPI as Markets Await Fed Moves

Key Moments

AUD/USD retreats toward the 0.7170 zone after Australian CPI data, staying capped below 0.7200.
Headline CPI rises 1.4% in Q1, taking annual inflation to 4.1%, with Trimmed Mean CPI up 0.3% on the quarter and 3.5% year-on-year.
Markets continue to price a higher probability of a 25 bps RBA hike in May as investors wait for the FOMC decision later today.

Australian Dollar Eases After CPI as 0.7200 Barrier Holds

The AUD/USD pair remains unable to decisively break above the 0.7200 level and has edged lower following the release of Australian inflation data during the Asian session on Wednesday. In the most recent trading, spot prices have slipped toward the 0.7170 area, although selling pressure appears contained ahead of the key FOMC policy announcement due later today.

Inflation Data Aligns With Expectations

The Australian Bureau of Statistics (ABS) reported that the headline Consumer Price Index (CPI) increased by 1.4% in the first quarter, pushing the year-on-year rate to 4.1%. Additional figures showed that the Trimmed Mean CPI – a core inflation measure – rose 0.3% between January and March and 3.5% compared with the same period a year earlier.

With no major surprise in the inflation readings, the Australian Dollar has come under some selling pressure amid a cautious risk backdrop, as markets continue to monitor ongoing geopolitical tensions.

Indicator	Period / Timing	Actual	Consensus	Previous	Source
Quarterly Consumer Price Index (YoY)	Wed Apr 29, 2026 01:30	4.1%	4.1%	3.6%	Australian Bureau of Statistics

RBA Expectations Remain Firm Despite AUD Pullback

The latest CPI release has not significantly altered expectations for the Reserve Bank of Australia. Market participants are increasingly factoring in the likelihood of a 25-basis-point rate increase at the RBA’s May meeting. These rate-hike expectations, together with relatively muted US Dollar price action, are offering some underlying support to AUD/USD and helping to contain downside moves for now.

At the same time, traders appear reluctant to take on large new positions ahead of the upcoming Federal Open Market Committee (FOMC) decision, which is a key focus for global markets today.

Fed Outlook and Geopolitical Risks Shape USD and AUD/USD

Investors are watching the US Federal Reserve for guidance on the future policy trajectory, especially in light of concerns that higher energy prices linked to ongoing conflicts could re-ignite inflationary pressures. Meanwhile, the continuing lack of progress in US-Iran negotiations and tensions around the Strait of Hormuz may continue to support the US Dollar’s role as a reserve currency.

These dynamics are likely to limit the upside for AUD/USD and suggest caution is warranted before betting on a continuation of the pair’s uptrend that has been in place for about one month.

About the Australian Quarterly CPI Indicator

The quarterly Consumer Price Index (CPI), released by the Australian Bureau of Statistics on a quarterly basis, measures the changes in the price of a fixed basket of goods and services acquired by household consumers. The quarterly CPI data series are calculated as the average of the three relevant monthly CPIs. The YoY reading compares prices in the reference quarter to the same quarter a year earlier. A high reading is seen as bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.

The quarterly Consumer Price Index (CPI) published by the Australian Bureau of Statistics (ABS) has a significant impact on the market and the AUD valuation. The gauge is closely watched by the Reserve Bank of Australia (RBA), in order to achieve its inflation mandate, which has major monetary policy implications. Rising consumer prices tend to be AUD bullish, as the RBA could hike interest rates to maintain its inflation target. The data is released nearly 25 days after the quarter ends.