Australian Dollar holds gains following Chinese inflation data

• AUD/USD remains steady as Chinese September CPI rose 0.9% YoY and PPI surged to 5.0%, above expectations.
• The US Dollar weakened after Fed official Williams ruled out further interest rate hikes in 2027.
• Traders await critical US September CPI data, expected to show headline inflation accelerating to 3.6% year-over-year.

AUD/USD gains ground for the second successive day, trading around 0.6990 during Asian hours on Wednesday. The pair remains stronger as the Australian Dollar (AUD) holds its gains following the release of Consumer Price Index (CPI) inflation data from China, Australia’s major trading partner.

China's National Bureau of Statistics reported that its annual CPI climbed 0.9% in September, up slightly from 0.8% in August, though coming in just below the market consensus of 1.0%. On a month-over-month basis, Chinese CPI rose 0.2% in September compared to a 0.4% increase previously, trailing the expected 0.3% growth. Meanwhile, China’s Producer Price Index (PPI) surged 5.0% year-over-year in September, accelerating from August's 3.8% increase and beating market expectations of 4.5%.

Additionally, the AUD/USD pair rises as the US Dollar (USD) softens following dovish remarks from New York Federal Reserve President John Williams. Speaking on Tuesday, Williams noted that while he maintains his view that one more rate hike may be appropriate this year, he does not foresee additional rate increases in 2027. Despite his comments, Fed funds futures traders are still largely betting that the US central bank will raise interest rates at least once in 2027, according to the CME FedWatch tool

Market focus now shifts to the US September CPI inflation data scheduled for release later in the North American session, which could offer clearer direction on the Federal Reserve's (Fed) monetary policy path. Headline US CPI is expected to show a year-over-year rise of 3.6% in September, up from 3.4% in August. Core CPI, which excludes volatile items, is projected to increase to 2.5% year-over-year from 2.4% in the previous month.

IMF meetings seen as key test of policymakers’ tightening resolve

Strategists at Scotiabank caution that this week’s IMF meetings could inject fresh volatility into markets, warning they “will provide a significant amount of headline risk as market participants assess policymakers’ appetite for continued tightening in an environment of elevated oil prices and broadening inflationary pressures.”