Market Drivers – US Session: Will Australian Inflation Steal the Spotlight?

As global markets brace for a pivotal week, the spotlight is turning toward Australia’s inflation data, set to influence currency movements and investor sentiment. On Tuesday, August 26, 2025, the US Dollar (USD) pulled back from recent gains, dipping toward the 98.00 mark on the US Dollar Index (DXY). This retreat was driven by mixed US Treasury yields and renewed focus on President Trump’s ongoing tensions with the Federal Reserve, with traders also eyeing key US inflation figures due later in the week. Amid this backdrop, Wednesday’s release of Australia’s Monthly CPI Indicator is poised to take center stage, potentially shaping the trajectory of the Australian Dollar (AUD) and broader market dynamics.

The AUD/USD pair saw modest gains, inching closer to the critical 0.6500 resistance level. Wednesday’s Australian data docket is packed, with the Monthly CPI Indicator leading the charge, alongside the Westpac Leading Index and quarterly Construction Work Done. These releases could provide fresh clues about the Reserve Bank of Australia’s next moves, especially as inflationary pressures remain a key concern for policymakers. A stronger-than-expected CPI reading might bolster the AUD, while softer data could keep it pinned below the 0.6500 threshold, leaving traders on edge.

Elsewhere, other major currencies also showed resilience against a softer USD. The EUR/USD pair clawed back some ground after Friday’s sharp sell-off, climbing toward 1.1660, with Germany’s GfK Consumer Confidence data set to draw attention on Wednesday. Similarly, GBP/USD posted decent gains but struggled to break past the 1.3500 barrier, with the CBI Distributive Trades report as the main UK event. In Asia, USD/JPY dipped toward 147.00 before recovering slightly, with Japan’s weekly Foreign Bond Investment figures due on August 28. These movements reflect a cautious market, balancing USD weakness with local economic indicators.

Beyond currencies, commodity markets are also in focus. Crude oil prices snapped a four-day rally, weighed down by a risk-off mood despite ongoing geopolitical tensions. Meanwhile, gold surged to a two-week high near $3,390 per troy ounce, fueled by USD softness, mixed yields, and concerns over the Fed’s independence. Silver, however, remained range-bound around $38.50 after Monday’s steep drop. As Wednesday’s data releases, including US MBA Mortgage Applications, the EIA’s crude oil inventory report, and a speech from Fed’s Barkin, unfold, markets are primed for volatility. Will Australia’s inflation data steal the show, or will global forces keep the USD in the driver’s seat?