The Australian Dollar rose 0.1% to about 0.7065 against the US Dollar in early European trading on Tuesday. It moved higher as traders waited for Australia’s January Consumer Price Index (CPI) report on Wednesday. Markets are watching the inflation data for clues about what the Reserve Bank of Australia (RBA) will do next. Earlier this month, the RBA raised the Official Cash Rate by 25 basis points to 3.85%. It also left the door open to more increases, pointing to ongoing inflation risks.

Rba Inflation Outlook

RBA Governor Bullock said on 3 February that inflation was still too high. Australia’s statistics agency is expected to report annual CPI at 3.7% in January, slightly down from 3.8% in December. Trimmed Mean CPI is expected to stay at 3.3%. The US Dollar held firm against other major currencies, even as US President Donald Trump made new trade-related threats. The US Dollar Index rose 0.12% to around 97.80. On Monday, Trump warned that the US could raise levies on countries he said were “playing games with existing trade agreements”. His comments came after a US Supreme Court ruling. This snapshot shows the Australian Dollar trading strongly above 0.7000 against the US Dollar ahead of an inflation report. Today, on February 24, 2026, the picture is different. AUD/USD is struggling near 0.6550. This points to a major change in fundamentals and market sentiment over the past couple of years.

Trading Implications And Risk Management

At the time, markets expected annual CPI to come in at 3.7%, and many saw the risks tilted to the upside. In the most recent quarterly data from late 2025, inflation was 4.1%. That shows price pressures have lasted longer than many expected. This fight against inflation remains a key issue for the RBA. In that earlier period, the RBA cash rate was 3.85% and the bank was still signalling possible hikes. Since then, they did raise rates further. The official cash rate has now been 4.35% for several months. Higher rates can affect both the currency and the wider economy in different ways than before. On the other side, US Dollar strength was once linked mainly to trade policy, with the DXY near 97.80. Today, the US Dollar is strong largely because the Federal Reserve is also battling inflation. Rates have stayed high, and the DXY has been trading above 104 more consistently. With a stronger US Dollar backdrop, it is harder for the Australian Dollar to make large gains. For derivative traders, volatility around Australian CPI releases is still a major opportunity, just as it was before. One approach is to buy straddles or strangles ahead of the next monthly CPI report. This can help traders benefit from a bigger-than-expected move in either direction. Markets remain very sensitive to inflation surprises. Because the Australian Dollar is weaker than in the earlier period, it also makes sense to plan for more downside risk. Buying AUD put options, or using bearish put spreads, can help manage that risk. This is especially important if US data stays strong and supports the “higher for longer” interest rate view. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now