AUD/USD traded near 0.7090 on Wednesday, up 0.42% on the day. The move followed stronger inflation in Australia, which lifted expectations for tighter monetary policy. Australian Bureau of Statistics data showed CPI rose 0.4% month-on-month in January, up from 0.1% in December. The Trimmed Mean rose 0.3% on the month, after 0.2% previously.

Australian Inflation Lifts RBA Tightening Expectations

Year-on-year, the Trimmed Mean rose to 3.4%. This was up from 3.3% and above forecasts. Headline inflation held at 3.8%, even though markets expected a small slowdown. The Reserve Bank of Australia recently raised its cash rate by 25 basis points to 3.85%. It also flagged ongoing upside risks to inflation. Money markets now fully price in another rate rise in the coming months. In the US, the Dollar had no clear direction after President Donald Trump’s address to Congress. The US Dollar Index hovered near 98.00 as markets weighed trade policy comments and the outlook, alongside mixed data that shaped Federal Reserve expectations. In the near term, the backdrop supports AUD/USD because the RBA and the Fed appear to be moving on different policy paths. The pair remains sensitive to geopolitical and trade headlines.

Trading Considerations For AUD USD

A familiar pattern is emerging: Australian inflation data continues to surprise on the upside. In January 2026, the monthly Consumer Price Index (CPI) rose 0.5%, beating forecasts and raising concerns that price pressures may stay stubborn. This is similar to what we saw at times in 2025, suggesting the inflation fight is not over. This persistent inflation supports the Reserve Bank of Australia’s decision to keep the cash rate at 4.35% at its February 2026 meeting, while still sounding hawkish. That tone differs from late-2025 expectations, when some investors looked for a shift to a more neutral stance. The RBA’s firmer position offers fundamental support for the Australian dollar. The US picture looks different. The latest Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation measure, continued to cool and came in at 2.4% year-on-year to January 2026. This reinforces the view that the Federal Reserve may be closer to rate cuts later this year, creating a clear policy gap versus Australia. For derivatives traders, this widening gap may support long AUD/USD setups. One approach is to buy AUD/USD call options with expiries in the next one to three months. This gives upside exposure while keeping maximum risk defined. Another option is to go long the Australian dollar against the US dollar using futures. This provides more direct exposure to a potential AUD/USD rise. However, futures carry more risk than options if the market moves sharply against the position. Given the uncertain global backdrop, strategies that benefit from higher volatility may also fit. With key central bank meetings ahead, an AUD/USD straddle could be effective. This involves buying both a call and a put at the same strike price, aiming to profit from a large move in either direction. Create your live VT Markets account and start trading now.

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