Australia is set to release its January inflation data, with expected growth in headline CPI from 2.5% to 2.6%. Analysts will pay close attention to the trimmed mean and its implications following December’s decline to 2.7%.

The January report indicates that employment increased by 44,000, surpassing predictions and entirely driven by full-time positions. Despite potential risks to growth from US protectionism, expectations remain for three further rate cuts by the Reserve Bank of Australia this year.

Tonight’s CPI print may influence increases in the Australian dollar, although bearish trends against the US dollar are anticipated due to tariff risks.

The upcoming Australian inflation figures will be one to watch. With headline CPI possibly inching up from 2.5% to 2.6%, the focus isn’t just on that number alone. The trimmed mean, which excludes more volatile price changes, will be just as telling. After dropping to 2.7% in December, it could signal whether inflation is settling or if underlying pressures remain.

Jobs data provided a boost. A 44,000 jump in employment, entirely made up of full-time positions, shows the labour market remains resilient. This kind of strength could complicate the broader economic outlook, particularly for interest rate expectations. Strong hiring trends might make it harder to justify aggressive rate cuts even though markets still expect the Reserve Bank to ease policy three more times this year.

A major concern remains the risks to growth from US protectionism. Heightened tariffs could dampen global trade, affecting demand for Australian exports and weighing on sentiment. This uncertainty, combined with tonight’s inflation data, could stir movement in the Australian dollar. While a higher CPI print might provide some support, broader trade risks still lean towards weakness against the US dollar.

Trading conditions in the short term may see shifts based on these inputs. Inflation trends, central bank policy, and economic risks abroad could all play a role in market positioning. The interactions between these elements will offer opportunities, but also increase the need for precise timing and strategy adjustments.