Australia’s Inflation appears to have left the building for today’s CPI report. With headline data missing expectations and moving further away from the target band, rate cut-calls are likely on the rise. And May could be a live meeting.
In February, the RBA downgraded Q2 CPI and trimmed mean to 2% (2.25% prior), and for CPI to average around 2% in April’s statement. With CPI dropping to 1.6% and trimmed mean hitting a 13-quarter low, today’s figures are a sore point for those outlooks, given RBA expect ‘inflation to remain stable’.
All in, its increasingly likely RBA will cut rates on 7th May with the unexpected fall with inflation. Remember, the RBA outlined they could cut rates with stable inflation and unemployment trending higher in April’s minutes. Given we may have seen CPI peak and unemployment could rise (if correlation with capacity utiliasation holds true), this is worse than RBA’s base-case for a cut and the ideal doomsday scenario for bears. Naturally, AUD is trading accordingly.
AUD/USD shed 1% after the release and made light work of its retracement line. 70c is the next obvious target, although keep in mind this level has barely been touched in in three years, barring the flash-crash early January and a 3-pip miss early March. That said, price action has produced a series of lower highs as its tracks the 200-day eMA lower and, with DXY considering a breakout of a large ascending triangle, an ‘eventual’ break below 70c could be on the cards. And no doubt, the RBA would be delighted.
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.
Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.