I am relativley new to the whole fx trading game and was wondering if anyone could answer me a question regarding inflation. Prequal - I only trade the AUD/USD. My current position is long at .7382. Next week in Australia when inflation figures are released it is expected that inflation is going to be higher than predicted. This of course will lead to an increase in interest rates. Which of these factors will the market react to first? Will the AUD decline because its purchasing power in the global market is seen as reduced or will the AUD appreciate in anticipation of an increase in interest rates (and concequently a large inflow of capital). Any help anyone could provide would be great?