The Australian dollar faces fresh volatility as TD Securities forecasts the Reserve Bank of Australia’s preferred core CPI measure will climb 0.9% quarter-on-quarter in Q2, matching market consensus but exceeding the prior quarter’s 0.8% gain. The projection would push annual core inflation to 3.7%, marginally below the RBA’s own 3.8% forecast but well above the central bank’s 2-3% target band.
The persistent inflation readings are reigniting debate over whether the RBA will need to resume rate hikes after holding policy steady in recent meetings. Markets had been pricing in potential rate cuts later this year, but stickier-than-expected price pressures could force traders to unwind those dovish bets. The data will directly impact AUD positioning ahead of the official CPI release, with commodity-linked currency pairs particularly sensitive to any shift in RBA rate expectations.
FXnCO Insight
Traders should prepare for increased AUD volatility and consider tightening stops on short positions as above-target inflation keeps RBA tightening prospects alive, potentially forcing a repricing of dovish rate cut expectations.
Source: FXStreet