Australian Dollar bulls seem hesitant on mixed CPI report; hangs near April lows vs USD

• AUD/USD edges higher following the release of Australian consumer inflation figures for May.
• Bulls, however, seem hesitant amid expectations that the RBA will hold interest rates steady.
• The USD climbs to an over one-year high on hawkish Fed expectations and further caps the pair.

The AUD/USD pair attracts some buyers following the release of softer Australian consumer inflation figures during the Asian session on Wednesday and reverses a part of the previous day's slump to the 0.6900 mark, or its lowest level since early April. Spot prices currently trade around the 0.6920-0.6925 region, though any meaningful recovery seems elusive amid a bullish US Dollar (USD).

The Australian Bureau of Statistics (ABS) reported that the headline Consumer Price Index (CPI) unexpectedly eased from 4.2% YoY to 4% in May. Adding to this, the monthly CPI fell more-than-expected, by 0.7% during the reported month, following a 0.4% growth recorded in April. The softer readings, however, were offset by the Trimmed Mean CPI, which rose 0.4% on a monthly basis and picked up slightly from the 3.4% to the 3.6% YoY rate in May.

The initial market reaction, however, turns out to be muted as the US-Iran peace deal has eased concerns about the energy shock, endorsing the view that the Reserve Bank of Australia (RBA) will hold rates steady in the coming months. This, in turn, holds back traders from placing aggressive bullish bets around the Australian Dollar (USD). Apart from this, the prevalent USD buying interest further contributes to capping the upside for the AUD/USD pair.

The USD Index (DXY) has advanced to a fresh high since May 2025 amid expectations for a rate hike by the US Federal Reserve (Fed). In fact, traders upped their bets that the US central bank will raise borrowing costs by at least 25-basis-points (bps) by the year-end following the Fed's surprisingly hawkish turn last week. This offsets the optimism over the US-Iran peace deal and might continue to underpin the USD, warranting caution for AUD/USD bulls.