AUD Jumps as Australian Inflation Exceeds Forecasts

• Currency pushes past $0.7090 following CPI release
• Annual price growth accelerates to 3.8% in January
• Core inflation measure edges up to 3.4%
• Traders price in May rate hike to 4.1%
• Policy outlook remains data dependent

The Australian dollar punched through the $0.7090 level Wednesday, building on recent momentum after fresh inflation figures came in hotter than anticipated.

Consumer prices rose 3.8% in January compared to a year earlier, topping consensus estimates that called for 3.7%.

Underlying price pressures also proved stickier than expected, with the RBA's preferred trimmed mean gauge climbing to 3.4%. That marks an uptick from December's 3.3% reading and exceeded what economists had forecast.

The inflation data arrives on the heels of a robust labor market report that showed unemployment holding at multi-decade lows alongside elevated wage growth.

The combination has shifted rate expectations, with markets now assigning high probability to a May move that could take the cash rate to 4.1%. Traders see higher odds of another increase by November.

The RBA made history earlier this year as the first major developed-market central bank to restart its tightening cycle after a pause. Officials continue to emphasize that future decisions will depend on incoming data rather than a preset course.