AUD/USD falls with local inflation figures on the watch


  • Aussie pair falls 0.80% to 0.6245 on Tuesday, testing 0.6250 support.
  • Trump’s universal tariff plan on Colombia rattles markets, fueling risk aversion.
  • Fed set to hold rates at 4.25%-4.50% on Wednesday; investors eye forward guidance.
  • Australia’s Q4 CPI in focus with subdued inflation likely to bolster RBA rate cut bets.

AUD/USD extends its losing streak near 0.6250 as US President Trump’s proposed incremental tariffs on Colombia heighten trade war anxieties. The Federal Reserve (Fed) is widely expected to keep its benchmark rate steady midweek, although markets remain on edge about the central bank’s policy stance amid Trump’s push for immediate cuts. Meanwhile, the Aussie struggles under persistent speculation of RBA easing, and a moderate US Dollar recovery in the face of deepening risk-off sentiment.

Daily digest market movers: Aussie fell as the US Dollar recovered on a sour market mood

  • President Trump endorsed a universal 2.5% levy on Colombia, which could climb monthly up to 20%. Investors see the plan as granting leverage in potential renegotiations, hence the rise in safe-haven demand for the Greenback.
  • Sentiment soured further after China’s DeepSeek demonstrated affordable AI success, spurring a tech sector shakeout and driving up USD’s safe-haven appeal.
  • Fed decision on deck as it is set to leave rates at 4.25%-4.50% on Wednesday. Traders will comb through policymakers’ remarks, especially given Trump’s calls for quick rate cuts.
  • Australia’s CPI will be pivotal as the fourth-quarter inflation is seen slowing to 2.5% YoY (from 2.8%), whereas quarterly CPI growth could rise to 0.3% (versus Q3’s 0.2%). A weak figure might amplify chatter of the RBA unwinding its restrictive policy in February.
  • Domestically, the RBA remains poised for a potential February rate cut if inflation persists below target and the economy fails to pick up steam.

AUD/USD technical outlook: Indicators diverge in a narrow trading range

The AUD/USD declined to 0.6245 on Tuesday, hovering within a tight 0.6230-0.6300 corridor. Technical cues are mixed: the Moving Average Convergence Divergence (MACD) histogram displays rising green bars, hinting at underlying bullish pressure.

Yet the Relative Strength Index (RSI) stands at 49 in negative territory, down sharply — signaling an ongoing lack of conviction. This mismatch underscores market indecision with traders awaiting pivotal data releases (the Fed’s policy decision and Australia’s CPI) for clearer direction before adopting more aggressive positions.

RBA FAQs

The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD met support near 0.6200… for now

AUD/USD met support near 0.6200… for now

AUD/USD regained the smile and charted humble gains for the first time after three straight daily declines, managing to revisit the mid-0.6200s following the weaker US Dollar.

AUD/USD News
EUR/USD looked unfazed by the ECB’s rate cut

EUR/USD looked unfazed by the ECB’s rate cut

EUR/USD posted humble gains around the 1.0430 zone on Thursday as investors largely bypassed the widely anticipated rate cut by the ECB, re-shifting their attention to the upcoming US PCE readings.

EUR/USD News
Gold looking for higher highs beyond $2,800

Gold looking for higher highs beyond $2,800

Further gains allow Gold to hit a record top in levels just shy of the key $2,800 mark per ounce troy on Thursday. The move higher in the yellow metal came in tandem with the offered stance in the Greenback and safe-haven inflows in response to persistent threats of US tariffs,

Gold News
Litecoin ETF gets acknowledged by SEC, LTC could stretch its rally to $186

Litecoin ETF gets acknowledged by SEC, LTC could stretch its rally to $186

Litecoin (LTC) gained over 15% on Thursday following the United States (US) Securities and Exchange Commission's (SEC) acknowledgment of Canary Capital's Litecoin exchange-traded fund (ETF) 19b-4 filing.

Read more
The ECB cuts rates as its voyage to neutrality continues

The ECB cuts rates as its voyage to neutrality continues

The European Central Bank has cut interest rates again by 25bp and looks set to continue the current rate cut cycle. Even without having it fully telegraphed in recent weeks, today’s ECB decision to cut policy interest rates by 25bp is no surprise. 

Read more
Trusted Broker Reviews for Smarter Trading

Trusted Broker Reviews for Smarter Trading

VERIFIED Discover in-depth reviews of reliable brokers. Compare features like spreads, leverage, and platforms. Find the perfect fit for your trading style, from CFDs to Forex pairs like EUR/USD and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures

Best Brokers of 2025