FX.co ★ Australian Dollar Near 3-Year High After Hot CPI Print

The Australian dollar hovered near a three-year high at approximately $0.699 on Wednesday. This movement followed an unexpected inflation report that increased speculation about a potential rate hike by the Reserve Bank in the near future. Data revealed that consumer prices climbed by 0.6% in the fourth quarter, aligning with market predictions, while annual inflation surged to 3.6%, marking the highest level in six quarters. The crucial core inflation rate also remained high, with the trimmed mean rising by 0.9% for the quarter, surpassing the 0.8% forecast and pushing the annual rate up to 3.4%, notably above the central bank's target range of 2-3%. This data coincides with an unexpected drop in unemployment last week, indicating the economy is performing stronger than anticipated and operating with limited spare capacity. Consequently, traders swiftly raised the likelihood of a quarter-point rate hike to roughly 72% for the upcoming meeting on February 3, up from 63% prior to the release of the CPI data.