Australia releases January inflation data tonight, and expectations are for a rebound in headline CPI from 2.5% to 2.6%. Markets will look closely at the trimmed mean to gauge whether the sharp decline to 2.7% in December was the start of a broader trend, ING’s FX analysts Francesco Pesole notes.

AUD/USD to return below 0.620 in the coming months

"We see risks of a relatively hot print tonight which can further endorse the RBA’s cautious stance on future rate cuts after kickstarting its easing cycle last week. Alongside inflation, the jobs market provided strong signals in the January report released after last week's rate cut. Employment increased by 44,000, doubling expectations and notably driven entirely by full-time hiring."

"Risks to growth related to the impact of US protectionism can still lead to three more cuts by the RBA this year, but we think tonight’s CPI print can prompt a hawkish repricing in the AUD curve, which currently embeds 50bp by year-end. We expect some support coming the Aussie dollar’s way, but like for EUR/USD, we remain bearish on AUD/USD on the back of tariff risk, and target a return below 0.620 in the coming months."