AUD/USD struggles to cheer an above-forecast Aussie inflation data

• AUD/USD adds just 7 pips on upbeat Aussie inflation data. 
• Both the headline and the trimmed-mean CPI bettered estimates. 
• Markets like to continue scaling back rate February cut expectations. 

AUD/USD is having a tough time putting on a good show despite the above-forecast Australian inflation data for the month of December. 

The headline inflation, as represented by the consumer price index (CPI), which was forecasted to remain steady at 1.7% year-on-year, rose to 1.8% in December. Meanwhile, the trimmed mean core CPI remained steady at 1.6% year-on-year, beating the forecasted drop to 1.5%. 

On a quarter-on-quarter basis, the trimmed mean held steady at 0.4% and the headline CPI rose to 0.7% from 0.5%, beating the expected print of 0.6%. 

So far, the AUD/USD pair has managed to add just seven pips on the upbeat data. At press time, the pair is trading at 0.6768. 

With inflation beating estimates, markets may continue to price out the prospects of an RBA rate cut in February. Ahead of the CPI report, the market was pricing a 30%
probability of a rate cut next month. The odds dropped sharply from 60% to 30% following the last week's upbeat inflation data. 

The AUD/USD, therefore, could pick up a strong bid during the day ahead - more so, if the equities show signs of life. The AUD has faced selling pressure over the last few days on Cornovirus-led risk aversion in the financial markets. 

Technical levels