The Australian dollar edges down following the CPI data release, as attention turns to the upcoming Federal Reserve policy decision.

AUD/USD faces selling pressure after the release of Australia’s consumer inflation data. Ongoing geopolitical uncertainty continues to support demand for the safe-haven US dollar, adding downside pressure on the pair. However, expectations of a hawkish Reserve Bank of Australia stance may help cushion losses for the Australian dollar, as markets now turn their attention to the upcoming FOMC decision.

The AUD/USD pair remains unable to break above the 0.7200 level, edging lower during Wednesday’s Asian session after the release of Australia’s consumer inflation data. Spot prices slipped toward the 0.7170 area in recent trading, although downside momentum appears limited ahead of the key FOMC policy announcement later today.

According to the Australian Bureau of Statistics (ABS), the headline CPI rose 1.4% in Q1, pushing the annual rate up to 4.1%. The Trimmed Mean CPI increased 0.3% over the quarter and 3.5% year-on-year. Despite the inflation figures coming in largely in line with expectations, the Australian dollar saw some selling pressure amid cautious market sentiment driven by ongoing geopolitical tensions.

At the same time, the data has not significantly altered expectations for a more hawkish Reserve Bank of Australia (RBA), with markets now assigning a higher probability of a 25-basis-point rate hike at the May meeting. Combined with relatively subdued US dollar movements, this helps cushion losses in AUD/USD and prevents a deeper decline. Traders, however, remain on the sidelines, awaiting clearer signals from the Federal Reserve’s policy decision.

Markets will closely monitor the FOMC statement for guidance on the Fed’s policy outlook, particularly amid concerns that rising energy prices linked to geopolitical risks could reignite inflation. Meanwhile, continued uncertainty around US-Iran relations and tensions over the Strait of Hormuz may keep demand for the US dollar supported as a safe-haven currency, potentially limiting further gains in AUD/USD and encouraging caution before positioning for a continuation of its month-long uptrend.