The Australian dollar climbed to around $0.70 on Wednesday, extending gains from the previous session after stronger-than-expected inflation data reinforced expectations of further interest rate hikes this year. Annual inflation rose to 3.8% in January 2026, slightly above market forecasts of 3.7%. At the same time, the RBA’s trimmed mean CPI – a key gauge of underlying price pressures – edged up to 3.4%, compared with both market expectations and December’s reading of 3.3%.
The figures followed recent data showing unemployment remained at historically low levels in January, while wage growth stayed elevated. Financial markets now anticipate that the Reserve Bank of Australia will raise the cash rate again in May, potentially to 4.1%, and are pricing in roughly a 60% probability of another increase in November. Even so, the RBA, which earlier this year became the first major developed-market central bank to resume rate hikes, continues to emphasize that future policy decisions will depend on incoming data.
