Aussie steady after CPI

The Australian dollar is trading sideways a the pair continues to hover close to the symbolic 75 level. AUD/USD is currently trading at 0.7498, up 0.03% on the day.

Australia Core CPI higher than expected

Australian inflation for the third quarter hasn’t had much of an impact on the Australian dollar but did give the markets plenty to chew on. Headline CPI rose 0.8%, matching expectations. The annual rate of headline inflation came in at 3.0%, vs. expectations of 3.1% and down from the Q2 gain of 3.7%. What was of more interest was Core CPI, which was higher than expected. The annual rate came in at 2.1%, vs. expectations of 1.8%, and on a quarterly basis, the 0.7% print beat the estimate of 0.5%. This means that core inflation has crept back into the RBA’s 2-3% inflation band for the first time since 2015.

This will invariably raise speculation about the RBA raising rates in response to high inflation, but this may be wishful thinking. The RBA has previously stated that it will not hike rates before inflation is “sustainably” within its target band, and one high core CPI reading as such doesn’t appear to qualify. There is a wide discrepancy between the RBA’s stance that rate hikes will not occur prior to 2024, and the market perception that the central bank could raise rates in 2023. The RBA holds a policy meeting on November 2, and it will be interesting to see if the bank shifts from its dovish stance.

In the meantime, Australian front-end yields have moved higher, which has helped the Aussie push into 75-territory. A hawkish tone from the RBA at next week’s meeting could give a boost to the Australian dollar.

AUD/USD technical 

• There is resistance at 0.7532, followed by the 200-SMA at 0.7560. Above, there is resistance at 0.7624.

• We find support at 0.7382 and 0.7297.