Australian CPI arrives in line (AUD positive)

Australia’s Third Quarter Consumer Price Index data has arrived, in line with expectations. The median forecast was for 0.5% QoQ and 1.7% YoY overall (from 1.6% in Q2) and 0.4% QoQ 1.6% YoY on the trimmed-mean CPI which is the Reserve Bank of Australia’s preferred core measure. 

The data arrived as follows:

• Consumer Price Index (QoQ) (Q3) 0.5% actual vs 0.5% consensus and 0.6% prior.
• Consumer Price Index (YoY) (Q3) 1.7% actual vs 1.7% consensus and 1.6% prior.

• CPI Weighted Median (QoQ) Q3: 0.3% (exp 0.4%; prev 0.4%).
• CPI Weighted Median (YoY) Q3: 1.2% (exp 1.3%; R prev 1.3%).

As for the RBA's preferred measure:

• RBA Trimmed Mean CPI (QoQ) (Q3) 0.4% actual vs 0.4% consensus and  0.4% prior.
• RBA Trimmed Mean CPI (YoY) (Q3) 1.6 % actual vs 1.6% consensus and 1.6% prior.

Australian Q3 19 CPI – Full Report

The Consumer Price Index (CPI) rose 0.5 per cent in the September 2019 quarter, according to the latest Australian Bureau of Statistics (ABS) figures. This follows a rise of 0.6 per cent in the June 2019 quarter.

The most significant price rises in the September 2019 quarter were international holiday, travel and accommodation (+6.1 per cent), tobacco (+3.4 per cent), property rates and charges (+2.5 per cent) and child care (+2.5 per cent). 

FX implications:

Inline this time around, but a sub 1.5% YoY in the trimmed-mean CPI would keep markets pricing in a reasonable risk of another rate cut before year-end. "Markets are pricing 3bp of easing at the 5 Nov RBA meeting, and a terminal rate of 0.50% (RBA cash rate currently at 0.75%)," analysts at Westpac noted. 

Indeed, RBA Governor Lowe said the Board, “is prepared to ease monetary policy further if needed. Having said that, it is extraordinarily unlikely that we will see negative interest rates in Australia.”

AUD/USD was an outperformer overnight and it climbed by 25 pips over the day to 0.6865 – On the data, AUD/USD was bid by around 10 pips, making back lost ground heading into the release from the session high of 0.6865 to low, 0.6848.