AUD/USD jumps as Australian inflation drops to 2.1%, fueling RBA rate cut bets

AUD/USD surged 0.8% (55 pips) to 0.6680 following the release of Australia's May 2025 monthly CPI data, which showed inflation falling to 2.1% year-over-year, significantly below the 2.3% forecast and April's reading. This marks the lowest inflation print in three years, bringing it within the Reserve Bank of Australia's 2-3% target band. The weaker-than-expected data has dramatically increased market expectations for an RBA rate cut at the next meeting, with swap markets now pricing in an 85% probability of a 25 basis point reduction. Technical indicators show AUD/USD breaking above the 0.6650 resistance level, with immediate targets at 0.6700 and the 50-day moving average at 0.6720. Support has formed at 0.6640. The dovish implications for Australian monetary policy contrast sharply with the Federal Reserve's stance, potentially capping further AUD gains despite today's rally.