AUD/USD traded near 0.7040 on Tuesday, down 0.20%, after it failed to hold above 0.7100 on Monday. The pair pulled back from multi-month highs as traders cut risk ahead of key data from Australia, China, and the US.
Australia’s January CPI is due on Wednesday and is the main local event this week. Headline inflation is forecast at 3.7% year on year, down from 3.8%. Trimmed Mean inflation is expected to stay at 3.3%.
Australian Inflation And Rba Outlook
These figures follow the Reserve Bank of Australia’s 25-basis-point rate increase, which lifted the cash rate to 3.85%. The RBA said the move reflected ongoing inflation pressures and stronger private demand. It also warned that policy may need to stay restrictive if inflation does not cool.
In the US, trade policy is still in focus after the Supreme Court blocked some earlier tariffs. President Donald Trump then suggested a new 15% global tariff under Section 122 of the Trade Act.
Trade uncertainty has weighed on cyclical currencies like the Australian Dollar and has supported the US Dollar. The CPI release may help decide whether AUD/USD can stay above 0.7000 or keeps consolidating after the drop from 0.7100.
This setup echoes early 2025, when AUD/USD was pulled in two directions: a hawkish RBA and fresh US tariff threats. The pair struggled to hold above 0.7100, which kept traders uncertain and set up a volatile first quarter last year.
Lessons From Early 2025 Volatility
The key January 2025 CPI report came in hotter than expected at 3.9%, above the 3.7% forecast. That showed inflation was not easing as quickly as hoped. It also backed the RBA’s restrictive stance at the time.
After that report, the RBA delivered another 25-basis-point hike in March 2025, taking the cash rate to 4.10%. This confirmed the view that the central bank was determined to curb inflation, which helped put a floor under the Australian dollar. When a central bank acts firmly, it often gives its currency stronger underlying support.
Even so, the proposed 15% global US tariff became a major headwind. The uncertainty hurt global trade sentiment and limited gains in the Aussie, keeping it range-bound. AUD/USD then spent much of the period moving between 0.6950 and 0.7100.
This kind of split—supportive domestic policy versus global risk pressure—often leads to higher volatility. For derivative traders, it is a useful example of how to price options when central bank policy clashes with geopolitical risk. Volatility sellers should be careful in these conditions because option premiums can rise quickly.
Today’s market looks different. Australian inflation has cooled to 2.9%, and the RBA has kept rates unchanged for several months. That means the rate-hike story that supported the Aussie in early 2025 is no longer driving the market. Traders may place less focus on domestic CPI and more on changes in global risk sentiment.
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