AUD/CAD scales 4-month peak as RBA flags upside inflation risks

The AUD/CAD currency pair scaled a fresh 4-month peak on Tuesday, after the minutes from the Reserve Bank of Australia’s November meeting showed policy makers considered it crucial to prevent inflation expectations from rising significantly. That’s why the RBA had to raise its cash rate by 25 basis points to 4.35% earlier in November.

Policy makers noted inflation in Australia had continued to decrease, but underlying inflation was stronger than expected a few months ago and, in quarterly terms, it had accelerated slightly.

The central bank now forecasts CPI inflation to be around 3.5% by the end of 2024 and at the top of the target range of 2%-3% by the end of 2025.

RBA Governor Michele Bullock had said that inflation would remain a “crucial challenge” for the upcoming 1 or 2 years.

Meanwhile, CAD traders now shift their focus to the October CPI inflation numbers due out at 13:30 GMT.

Canada’s annual headline inflation probably eased to 3.2% in October, according to market consensus, from 3.8% in September.

Annual core CPI inflation probably slowed to 2.6% in October from 2.8% in the prior month.

As of 9:05 GMT on Tuesday AUD/CAD was edging up 0.21% to trade at 0.9017. Earlier in the session, the minor Forex pair went up as high as 0.9035. The latter has been the pair’s strongest level since July 17th (0.9046).