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A fresh assault by the Australian dollar follows a hot inflation print.
Australia's January headline inflation was stable at 3.8% y/y said the ABS on Wednesday, which was stronger than an anticipated retreat back to 3.7%.
The trimmed mean - which is a core measure of inflation closely watched by the Reserve Bank of Australia - accelerated to 3.4% y/y (+0.3% m/m) from 3.3% y/y in December.
"The Australian dollar found fresh strength on firmer than expected CPI data that heightened anticipation of further RBA policy tightening," says a note from Saxo Bank.
AUD/USD rebounded back above 0.7110 after closing Tuesday below 0.7060. EURAUD hit a new cycle low since March of last year below 1.6600 while AUDNZD tested new decade-plus highs above 1.1880.
The GBP/AUD exchange rate fell to a new multi-month low at 1.9006 before recovering back to 1.9074.
Currency market movements tell us that the market's bet for further RBA rate hikes is proving a decisive driver of AUD outperformance this year.
"The trimmed mean outcome adds some further risk that the RBA will hike the cash rate in May," says Adelaide Timbrell, an economist at ANZ.
The RBA could be accused of being too timid when it raised interest rates in the post-pandemic years and then being too optimistic when it lowered rates in 2025.
After all, it's now in a unique position amongst global central banks, given it is now in a hiking cycle when others are under no pressure to do so.
Regardless of the RBA's missteps, the Aussie dollar is finding these hot inflationary conditions to be a tailwind.
Consensus projections for the next four quarters, compiled from leading investment banks.
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