AUD/USD rose to about 0.7130 in early Asian trade on Thursday. The Australian Dollar moved up after higher domestic inflation data.
Australia’s CPI rose 4.6% year on year in March, up from 3.7%, ABS data showed on Wednesday. This was below the 4.7% forecast and above the RBA target range.
Australian Inflation And Market Focus
Monthly CPI was 1.1% in March, up from 0% previously. Traders are awaiting China’s PMI data later on Thursday.
The FOMC voted 8–4 to keep rates at 3.5% to 3.75% on Wednesday. This was the first time four members dissented since October 1992.
The committee said “inflation is elevated, in part reflecting the recent increase in global energy prices.” Fed Chair Jerome Powell said he will remain a Fed governor for an indefinite period after his term as chair ends.
Kevin Warsh, named as a successor by Donald Trump, is reported to be on track to replace Powell as chair.
Derivative Strategy Considerations
Looking back to 2025, we saw how strong Australian inflation data put pressure on the Reserve Bank of Australia to raise rates. This hawkish sentiment, combined with a divided US Federal Reserve, helped push the AUD/USD pair up towards the 0.7130 level. That environment clearly favored a stronger Australian dollar.
The dynamic has since changed, as the Federal Reserve has become much more aggressive, lifting its policy rate to a 5.00%-5.25% range to fight stubborn US inflation, which is still tracking at 3.4% annually. This sustained tightening has provided significant support for the US Dollar. Consequently, the AUD/USD has fallen and now trades much lower, near 0.6550.
In Australia, the RBA’s rate hikes to the current 4.50% level have started to show results, with the latest quarterly inflation figures for 2026 slowing to 3.8%. This slowdown from the 4.6% rate seen last year makes the RBA less likely to hike further. The market is now pricing in a period of inaction from the Australian central bank.
For derivative traders, this policy divergence suggests positioning for further Aussie weakness or limited upside in the coming weeks. Buying AUD/USD put options offers a way to profit from a continued decline, especially as implied volatility is rising on the back of this central bank uncertainty. This strategy can be useful to hedge long positions or for outright speculation.
Another approach is to sell out-of-the-money AUD/USD call spreads to collect premium, based on the view that any significant rallies will be capped. This strategy benefits if the pair trades sideways or drifts lower. The attractive interest rate differential, which favors holding US Dollars over Australian Dollars, also supports bearish to neutral strategies on the pair.
