AUD/USD slides as geopolitical countdown meets AU inflation and fuel supply test

AUD/USD rebounds momentarily on RBA's hawkish rate decisions

AUD/USD finished higher last week at 0.7021, gaining 0.58%, thus breaking a two-week losing streak. The Aussie gained support from the Reserve Bank of Australia's (RBA) hawkish rate hike and a softer US dollar, which retreated following similarly hawkish meetings by the European Central Bank (ECB) and the Bank of England (BoE).

At last week’s board meeting, the RBA implemented its second consecutive 25 basis point (bp) hike, raising the cash rate target to 4.10%. The decision was narrowly passed with a 5-4 vote, reflecting some debate on timing but a broad consensus on the need for further tightening.

Governor Bullock's post-meeting comments highlighted that inflationary risks had increased, citing strong domestic demand and global factors, like rising energy prices, that could add pressure. This hawkish stance helped widen the yield advantage for the Aussie against the US dollar.

The US dollar's retreat was aided by hawkish tones from the ECB and BoE, with interest rates markets in those regions aggressively pricing in hikes for April and July.

Trump ultimatum weighs on AUD/USD

While last week was dominated by central bank divergence, the Middle East conflict is now in focus. President Trump issued a 48-hour ultimatum to Iran to reopen the Strait of Hormuz, threatening to target Iranian power infrastructure if the ultimatum is not met.

Iran responded with defiance, escalating the situation. As a result, AUD/USD has dropped back below the 0.7000 level, recently touching a low of approximately 0.6968, representing a 0.79% decrease.

Whether AUD/USD can reclaim the 0.7000 level depends on several factors: resolving Trump's ultimatum concerning Iran, the outcome of Wednesday’s Australian consumer price index (CPI) data, and the arrival of crucial offshore petrol and diesel supplies. With domestic fuel stockpiles declining, timely arrivals are essential.

AU: CPI

Date: Wednesday, 25 March at 11.30am AEDT

January data showed ongoing inflationary pressures, with headline CPI steady at 3.8% year-on-year (YoY), matching December but exceeding 3.7% expectations. The RBA's preferred trimmed mean measure ticked up to 3.4% from 3.3%.

Key drivers included:

• Housing (up 6.8% YoY)
• Electricity (up 32.2% annually due to subsidy unwinds)
• Rents (up 3.9%)
• Medical services (up 4.2%)
• Goods inflation rose to 3.8%
• Services eased slightly to 3.9%.

For the February report, preliminary expectations point to headline inflation rising to around 3.9% YoY, with the trimmed mean holding steady at 3.4%.

These findings follow the RBA's rate hike to 4.10%, reflecting concerns over persistent inflation and the risks associated with Middle East-driven energy price increases. February's data will inform the board's May meeting decisions, preceding the March quarterly and first quarter (Q1) inflation update on 29 April, just before the 5 May decision.

The Australian rates market shows 18 bp of tightening for the RBA’s May board meeting, with 75 bp of cumulative hikes expected for 2026. This aligns with projections for three more 25 bp hikes this year, bringing the RBA’s cash rate to 4.85% – unseen since November 2008.

AU trimmed mean CPI chart

AUD/USD technical analysis

In recent updates, a decisive break above resistance at 0.7150 - 0.7170 was necessary to confirm an end to the AUD/USD correction from the mid-February high of 0.7147, indicating a resumed uptrend.

Following a high of 0.7189 on 11 March, AUD/USD retreated, potentially marking a Wave V (Elliott Wave) high, concluding a five-wave advance from the November low of 0.6419.

If correct, AUD/USD has entered a Wave IV pullback expected to extend toward the 0.6950 - 0.6900 zone. A break below this could lead to a further decline towards approximately 0.6750.

AUD/USD daily candlestick chart

• _{Source: TradingView. The figures stated are as of 23 March 2026 Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}