Premium Watchlist Summary: Australian CPI (Q3 2025)

Australia posted stronger-than-expected inflation data as the headline annual CPI jumped to 3.2%, beating the central bank’s target range of 2-3%.

How has the Australian dollar reacted and which of our watchlists has provided the best trading opportunity?

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We break down our AUD setups this week and how each pair fared following the hotter than expected Australian CPI data, while markets remained largely focused on trade headlines.

Installation

What we watched: Australian Consumer Price Index (Q3 2025)

• Waiting: Core CPI to rise from 0.7% to 1.0% q/q or from 2.1% to 2.9% y/y in the September quarter
• Result data: Core CPI rose to 1.3% qoq or 3.2% y/y, above the RBA’s target range of 2-3%.
• Market environment around the event: Sentiment and risk correlations were mixed as asset classes were driven by trade optimism ahead of the Trump-Xi meeting, a rally in the US tech sector, central bank positioning and renewed geopolitical tensions in Israel

The result of the event

Australia’s CPI rose 3.2% year-on-year in the third quarter of 2025, the highest inflation rates in more than a year and were above the Reserve Bank of Australia’s target range for the first time since Q2 2024.

Main conclusions:

• CPI title increased by 3.2% annually in the third quarter of 2025, well above the consensus forecast of 3.0% and accelerating from 2.1% in the second quarter
• Quarterly inflation increased by 1.3%, mainly due to housing construction (+2.5%), recreation and culture (+1.9%) and transport (+1.2%)
• Trimmed inflation rose to 3.0% annualized from 2.7% in Q2 – the first increase since December 2022

The most significant price growth in the 3rd quarter was concentrated in the housing sector, culture and recreation, and transport. Property rates and fees also recorded their biggest quarterly rise since 2014, increasing by 6.3% as local councils introduced rate reviews.

A fundamental shift worked: AUD bullish setups

Broad market and exogenous factors:

Trade Optimism and Risk Rally (Monday-Tuesday): Markets rose as events over the weekend exposed the diplomatic framework between the US and China ahead of the Trump-Xi summit on Thursday. The prospect of a trade de-escalation sparked a broad-based increase in risk, sending stocks to new highs and gold falling below $4,000. The extended US government shutdown continued to deprive markets of important economic data.

Central Bank Volatility and Powell’s Hawkish Reversal (Wednesday): The Fed secured an expected 25 basis point cut, but Chairman Powell shocked markets by saying that December’s cuts were not “off the table.” This sparked a sharp rally in the dollar and sent the yield on the 10-year note jumping to 4.10%. The Bank of Canada also cut rates but signaled its easing cycle may be over, while Australia’s tepid CPI all but ruled out an RBA cut in November.

Trade truce and Central Bank surprises (Thursday-Friday): US President Trump boasted that his meeting with Chinese President Xi was “incredible” and boasted of a tariff truce that temporarily eased trade tensions. Volatility remained high in the forex market as the Bank of Japan downplayed its sharp stance and cited the need to wait for more data before tightening. Meanwhile, the ECB also left rates unchanged, but paid particular attention to external risks from trade and geopolitics that could change its policy.

AUD/NZD: Bullish Event Outcome + Risk Reduction Scenario

= Possibly a good chance of a net positive

This setup focuses on the long slope and has probably produced exceptionally good results throughout the week. After the initial discussion, AUD/NZD broke through its October trendline resistance ahead of the CPI release and hovered around the psychological level of 1.1400 and the R2 pivot point at 1.1394 as Australian inflation data hit the course.

Hotter-than-expected CPI print prompts immediate confirmation of Aussie’s fundamental long biaswhich is confirmed by the movement of AUD/NZD to an immediate break above R2. After a quick consolidation and pullback, the pair retested the R2 Pivot Point resistance, which turned into support, before rallying to fresh weekly highs as underlying sentiment favored the Aussie over the Kiwi.

The bullish movement towards the end of the week was likely driven by an apparent fundamental gap between the two currencies. An inflation surprise in Australia led the RBA to be cautious about cutting rates, while weak data from New Zealand, including a drop in ANZ Roy Morgan confidence to 92.4, increased pressure on Kiwis. Even as Powell’s hawkish FOMC tone shook risk sentiment midweek, the pair held firm at key support before rallying higher again.

Because of the pullback, some of the trade management factors that a person would do would likely affect the degree to which the trade results, but because AUD/NZD closed the week above the discussion price zone and the post-event price zonethis discussion would very likely produce a net positive for most trading strategies.

Can’t get off the watch list – AUD and AUD/USD bearish setups

AUD/USD: Bullish outcome of AUD event + risk scenario

AUD/USD 1 Hour Forex Chart by TradingView

AUD/USD had a strong start to the week, breaking above the 0.6525 triangle resistance level ahead of the CPI release. The hotter inflation news sparked a quick rally, sending the Aussie up significantly, particularly against the pound sterling and the New Zealand dollar.

But Powell’s hawkish tone at the mid-week FOMC reversed sentiment in the US dollar mid-weekpushing the dollar up which we believe has effectively weakened our conviction or nullified our long-standing bias against AUD/USD.

This FOMC event quickly sent AUD/USD forex traders back into sell mode, forcing the pair to retrace most of its post-CPI gains. Anyone who ignored the USD fundamentals and tried to ride AUD/USD is likely to see a very negative result by the end of the week, regardless of the trading style/strategy used.

AUD/CAD: Bearish Event + Risk-Environment

AUD/CAD 1 hour forex chart by TradingView

The outcome of the target event did not contribute to bearish AUD setups as Australia’s CPI exceeded expectations and the RBA’s target range. The result plus bullish sentiment in the pair before the event invalidated the AUD/CAD discussionwhich makes it unusable to go beyond the observation phase.

After the Australian event, the CPI Looney actually benefited from the recovery in crude oil prices caused by renewed geopolitical tensions in Russia and US sanctions. Coupled with the somewhat less startling comments from the BOC mid-week, this is likely why AUD/CAD moved lower and the pair fell into a consolidation pattern as bulls on both sides butted heads in the pair for the rest of the week.

EUR/AUD: Bearish event outcome + risk-free environment

EUR/AUD 1 Hour Forex Chart by TradingView

This setup assumed that weaker inflation in Australia would trigger a sell-off in the Australian dollar, positioning EUR/AUD for a rebound from the middle of its long-term range. Hotter than expected, the CPI invalidated this thesis from the outset.

While risk flows have periodically supported safe havens such as the euro during mid-week volatility following Powell’s hawkish tone, the fundamental argument for AUD strength has transcended these temporary shifts. EUR/AUD remained under pressure throughout the week as an inflation surprise boosted expectations of continued RBA caution on potential rate cuts, and as the euro eased slightly as the US dollar strengthened in the second half of the week.

Judgment

Australia’s inflation surprise strongly supported the Australian dollar’s bullish opportunities, with AUD/NZD moving beyond the watch phase as a viable real-time risk candidate. Stronger-than-expected CPI readings, which pushed headline inflation to 3.2% y/y and above the RBA’s target range, reinforced the case for more caution from the central bank.

The AUD/NZD the long bias was also a likely winner. The pair’s rally was confirmed immediately after the CPI release and may have attracted fundamental bulls, particularly after a retest of broken Pivot resistance levels. Fundamental divergences between Australia’s sharp inflation and New Zealand’s softer data support a compelling fundamental narrative that proved resilient even as broader risk sentiment shifted midweek.

Overall, we rate our watchlist discussions as “very likely” remains bullish as the bullish bias in the AUD combined with a challenging but somewhat risk-free market environment around the target event allowed AUD/NZD to benefit from stronger than expected CPI results.

Main conclusions:

Fundamental divergence trumps the sense of risk

Even as risk appetite shifted mid-week following Powell’s hawkish tone, AUD/NZD continued to rally thanks to sharp inflation in Australia and weak data from New Zealand. Strong fundamentals outweighed changes in market sentiment.

Usage: When trading event-driven crosses, focus on fundamental divergences. Solid macro stories endure; couples who are driven by feeling often don’t.

Manage synchronization around major events

The CPI release came just before central bank meetings/statements and major trading events, creating a catalyst-filled week that called for tighter risk controls.

Usage: When the calendar is filled with several events, plan outings and risk cuts early. Active management between catalysts can mean the difference between profit and loss.

Technical and fundamental alignment increases conviction

AUD/NZD had already broken its trendline before the CPI release and inflation confirmed this.

Usage: Prefer settings where technicals and fundamentals match. When price action supports your pre-event bias, momentum typically lasts longer and risk-reward improves.