• AUD/NZD hit fresh 13-year highs at 1.2230, before pulling back to levels right above 1.2200.
• Australian CPI surged in March, fuelled by higher Oil prices amid Iran's war.
• These figures have boosted hopes of an RBA rate hike at next week's meeting.

The Australian Dollar (AUD) ticks up against the New Zealand Dollar (NZD) on Wednesday, extending its rally to 1.2230 for the first time since April 2013, before pulling back to levels near 1.2200 at the time of writing. The pair has been boosted by Australian inflation figures, which add pressure to the Reserve Bank of Australia (RBA) to hike interest rates at next week’s meeting.

Data from the Australian Bureau of Statistics released earlier on Wednesday showed that consumer inflation, as measured by the Consumer Price Index (CPI), surged to a 4.6% year-on-year pace in March, up from 3.7% in February, boosted by the rally in energy prices triggered by the war in Iran.

Inflation jumps above the RBA's target

Consumer prices accelerated 1.1% on the month in March, following a flat performance in February. The Trimmed Mean CPI witnessed a more moderate advance, by 0.3% in March from 0.2% in February, while the yearly rate remained growing at a steady 3.3% rate, unchanged from the previous month but above the RBA’s 3% limit of the target band for inflation.

These figures have boosted market expectations of upcoming RBA interest rate hikes, which meet on May 5. Governor Michelle Bullock affirmed last week that interest rates will rise again if inflation "becomes entrenched", but suggested that the timing was still unclear. These figures, however, might have prompted committee members to act fast.

In New Zealand, the focus on Wednesday will be on the conference of the Reserve Bank of New Zealand (RBNZ) Governor, Anna Breman, who might provide further clues about the bank’s rate path. Markets are increasingly pricing an interest rate hike in July.