AUDUSD gains 0.25% on the back of Australia’s strongest CPI inflation data in over a year, which reduces the likelihood of further rate cuts. Hawkish expectations toward the Reserve Bank of Australia (RBA), coupled with a broader risk-on sentiment and renewed optimism over a potential U.S.-China trade peace, are making the Australian dollar the best-performing G10 currency this week.
AUDUSD broke above the 50% Fibonacci retracement level of the latest downward wave but encountered resistance near recent highs around 0.66. Strong “risk-on” momentum is also visible on AUDJPY (in blue). Source: xStation5
What’s driving AUDUSD today?
- Consumer inflation (CPI) rose in Q3 2025 to 3.2% (previous: 2.1%, consensus: 3%) — the highest since Q2 2024. Even more concerning for price stability, monthly data show core inflation accelerating to 3.7% in September. The main price pressures came from housing (+2.5% q/q), recreation and culture (+1.9%), and transport (+1.2%), while electricity prices surged 9%.
- The higher-than-expected reading ties the RBA’s hands, after the central bank paused easing in September amid worrying monthly data (rates have remained at 3.6% since August). The RBA has emphasized its preference for less volatile quarterly figures, so this clear confirmation of persistent inflation significantly reduces the likelihood of further rate cuts. Moreover, the trimmed mean CPI — which excludes extreme price movements — exceeded the RBA’s forecast for the first time since 2022.
- Still, the RBA faces a policy dilemma, balancing resurgent inflation against a slowing labor market. Unemployment rose to 4.5% last month, the highest in nearly four years, though Governor Michele Bullock maintained a hawkish tone, noting labor data volatility and that “unemployment hasn’t risen much above forecasts.”
- As a result, the AUD strengthened broadly, extending this week’s bullish pivot against the U.S. dollar. The currency is also supported by global risk appetite, fueled by strong Wall Street earnings, progress in Trump’s trade talks with China and rising Australian bond yields.
Australian 2-year yields have climbed roughly 20 bps since the start of the week to their highest level since May 2025, with AUDUSD closely tracking the yield spread after a brief period of stagnation. Source: XTB Research, Bloomberg data.
The material on this page does not constitute financial advice and does not take into account your level of understanding, investment objectives, financial situation or any other specific needs. All information provided, including opinions, market research, mathematical results and technical analyzes published on the Website or transmitted To you by other means, it is provided for information purposes only and should in no way be construed as an offer or solicitation for a transaction in any financial instrument, nor should the information provided be construed as advice of a legal or financial nature on which any investment decisions you make should be based exclusively To your level of understanding, investment objectives, financial situation, or other specific needs, any decision to act on the information published on the Website or sent to you by other means is entirely at your own risk if you In doubt or unsure about your understanding of a particular product, instrument, service or transaction, you should seek professional or legal advice before trading. Investing in CFDs carries a high level of risk, as they are leveraged products and have small movements Often the market can result in much larger movements in the value of your investment, and this can work against you or in your favor. Please ensure you fully understand the risks involved, taking into account investments objectives and level of experience, before trading and, if necessary, seek independent advice.
