**AUD/USD Forecast: Australian Dollar Extends to New 2025 Highs as US Inflation Data Softens**
*Based on reporting by Pablo Piovano for FXStreet, with additional analysis.*
—
**Overview**
In the foreign exchange market, the AUD/USD pair has garnered significant attention recently as the Australian dollar surged to its highest levels since early 2025. The main catalyst propelling this upward movement has been the latest round of United States inflation data, which has shown signs of cooling. As investors digested the softer US Consumer Price Index (CPI) figures, sentiment shifted further against the US dollar, allowing the Australian dollar to advance.
This article breaks down the key drivers behind the AUD/USD rally, analyzes broader macroeconomic factors, and discusses what may come next for the pair.
—
**Key Highlights**
– AUD/USD reached new yearly highs amid a broad US dollar selloff
– Softer US inflation data increased expectations for a Federal Reserve rate cut
– Commodity prices and domestic economic data further support the Australian dollar
– Technical analysis signals potential for further AUD/USD gains
– Markets anticipate shifts in both US and Australian monetary policy
—
**US Inflation Eases, Weighing on Dollar**
The primary factor driving the AUD/USD upwards has been the release of April’s US inflation data. According to the Bureau of Labor Statistics, US consumer prices rose at a moderate pace as both headline and core CPI readings fell short of analyst expectations.
– **Headline CPI (YoY):** Increased by 3.4% in April, in line with the previous reading, and just under market forecasts
– **Core CPI (YoY):** Rose by 3.6%, lower than both the March figure and consensus estimates
Investors interpreted these readings as indicative of slowing price pressures in the world’s largest economy. This has fostered hopes that the Federal Reserve could be closer to easing monetary policy in the months ahead. With prior concerns about stubborn inflation keeping US rates higher for longer, any sign of moderation is likely to influence market sentiment and rate expectations.
—
**Market Reaction: Dollar Sinks, Aussie Surges**
In the immediate aftermath of the US inflation report, the US dollar index (DXY) dropped sharply below 104.00. This broad-based dollar retracement provided breathing room for risk-sensitive currencies like the Australian dollar.
– **AUD/USD Reaction:** The pair jumped from around 0.6620 before the data release to above 0.6700
– **Multi-Month Highs:** AUD/USD touched its highest level since January 2025
– **Risk Sentiment:** Appetite for riskier assets heightened as traders recalibrated expectations for US monetary policy
This dynamic is particularly beneficial for the Australian dollar, which often thrives when global risk sentiment is robust and when the US dollar is under pressure.
—
**Fed Rate Cut Bets Rise**
With softening inflation comes renewed speculation about when the Federal Reserve will begin reducing interest rates. Swaps markets
Read more on AUD/USD trading.