AUD/USD retreats after failing to hold multi-month high - BBH

AUD/USD trimmed gains after testing resistance near 0.6450, as market attention shifts to upcoming Q1 CPI data. While RBA officials remain cautious on inflation progress, markets have fully priced in a rate cut at the March 20 meeting, reflecting continued uncertainty around trade policy and inflation dynamics, BBH FX analysts report.

RBA's kent offers no policy signals

"AUD/USD pared back gains after testing a multi-month high at 0.6450 overnight. There was no policy-relevant insight from RBA Assistant Governor Christopher Kent speech overnight. Kent discussed Australia's external position and acknowledged 'the sharp rise in volatility in FX markets in early April.' Indeed, global FX volatility increased in April to near a two-year high on US tariffs related news. Ongoing uncertainties surrounding US trade policies and the potential economic impact of tariffs are likely to keep FX volatility elevated."

"Q1 CPI is the next domestic data highlight (tomorrow, 2:30am London). Australia headline CPI is expected at 2.3% y/y vs. 2.4% in Q4 and the policy-relevant trimmed mean CPI is forecast at 2.8% y/y vs. 3.2% in Q4. The RBA projects trimmed mean CPI of 2.7% throughout its forecast horizon to 2027. Meanwhile, Governor Michele Bullock cautioned that the Board does not have "_100% confidence_" that inflation is moving sustainably towards the midpoint of the 2-3% target range. For the March 20 RBA policy meeting, cash rate futures have fully priced-in a 25bps cut and 16% odds of an additional 25bps reduction."