Australia CPI inflation set to ease to 3.7% YoY in November

The Australian Bureau of Statistics (ABS) will publish the Consumer Price Index (CPI) data for November at 00:30 GMT on Wednesday.

This is the second complete monthly CPI report, as the government continues to transition from the quarterly CPI to the monthly gauge as the primary measure of headline inflation.

“However, the RBA has said it still prefers the quarterly prints for a better gauge of inflation trends, given the new data can be volatile,” according to Reuters.

The inflation report is eagerly awaited to gauge the next interest rate move by the Reserve Bank of Australia (RBA), which could significantly impact the performance of the Australian Dollar (AUD).

What to expect from Australia’s inflation rate numbers?

Economists forecast Australia’s CPI to increase by 3.7% annually in November, after rising by 3.8% in October – the highest since June 2024 and above median forecasts of 3.6%. The RBA’s inflation target is in the range of 2%-3%.

In October, the CPI showed no growth on a monthly basis, while the Trimmed Mean CPI rose at an annual rate of 3.3% in the same period.

Improved business conditions, robust economic growth and hotter-than-expected inflation prompted the central bank to keep the Official Cash Rate (OCR) steady at 3.6% following its December monetary policy meeting.

Speaking at the post-policy meeting press conference in December, RBA Governor Michele Bullock noted that “inflation and jobs data will be important for board meeting in February,” adding that she “would not put timing on any future move, (it) will be meeting by meeting.”

Since then, the Australian labor market has shown signs of slowing, with the number of employed people dropping by 21,300 in November and Full-time Employment falling by 56,500 even as the Unemployment Rate remained at 4.3% in the reported month.

Against this backdrop, the Australian CPI data holds the key to determining whether the RBA could opt for a rate hike next month. “RBA cash rate futures imply nearly 50 basis points (bps) of rate increase in 2026,” according to analysts at BBH.

How could the Consumer Price Index report affect AUD/USD?

Heading into the Australian CPI inflation showdown, the AUD is sitting at its highest level in 15 months against the US Dollar (USD) near 0.6750. Expectations of monetary policy divergence between the RBA and the US Federal Reserve (Fed) remain an important catalyst underpinning the AUD/USD pair.

A surprise pick-up in Australia’s inflation could lift the odds for an interest rate hike by the RBA as early as next month, pushing AUD/USD further toward the 0.6800 level. On the other hand, a bigger-than-expected drop in the inflation figure could alleviate the pressure on the RBA for an imminent shift to tightening, which will likely fuel a correction in the Aussie.

Dhwani Mehta, Asian Session Lead Analyst at FXStreet, highlights key technical levels for trading AUD/USD following the CPI release.

“AUD/USD is holding its recent bullish momentum, with the 14-day Relative Strength Index (RSI) approaching the overbought territory, suggesting that there could be more room for upside before a pullback kicks in.”

“The Aussie pair could see a fresh leg north toward 0.6800 on acceptance above the 0.6750 psychological mark. The next relevant resistance levels are aligned at the October 3, 2024, high of 0.6888 and the September 2024 high of 0.6942. Conversely, any retracements could test the initial support at the 21-day Simple Moving Average (SMA) at 0.6671, below which a deeper correction will open toward the 0.6600 mark,” Dhwani adds.