Aussie CPI in line with expectations, AUD steady

Australia’s second-quarter Consumer Price Index has been published in line with expectations and there has been no market reaction, despite the headline being the highest since 2008.

Australia’s Q2 CPI

Australia Q2 CPI headline rate 3.8% YoY vs. expected 3.8%. 0.8% QoQ vs. expected 0.7% QoQ and prior 0.6%.

Trimmed mean remains below the Reserve Bank of Australia's target band of 2-3% and arrived at 1.6% YoY vs the prior 1.1%. This was expected and hence there has been no shakes in the currency market.

For the quarter, it arrived at 0.5% as expected bs the prior 0.3%.

AUD crosses update

AUD has stood still in response to the data as follows:

Additionally, the prior analysis EUR/AUD bulls banking on a benign Aussie CPI outcome, has not seen a boost as needed.

Aussie COVID lockdowns in focus

Meanwhile, markets are more concerned for Sydney’s lockdown that looks likely to be deeper and longer than markets first presumed.

It has been announced that it will extend for another 4-weeks. However, some analysts anticipate tight restrictions to continue until at least the end of September, such as analysts at ANZ Bank.

''There have also been lockdowns in Victorian and South Australia. As a result, we expect Gross Domestic Product to fall 1.3% QoQ in Q3, compared with our previous estimate of +0.4%,'' the analysts said.

''Further government support seems likely, and this will underpin a rebound in activity once restrictions lift. The RBA is also expected to pitch in by delaying the reduction in weekly bond purchases announced at its July Board meeting until at least November.''

Why CPI matters to traders?

The quarterly Consumer Price Index (CPI) published by the Australian Bureau of Statistics (ABS) has a significant impact on the market and the AUD valuation. The gauge is closely watched by the Reserve Bank of Australia (RBA), in order to achieve its inflation mandate, which has major monetary policy implications. Rising consumer prices tend to be AUD bullish, as the RBA could hike interest rates to maintain its inflation target. The data is released nearly 25 days after the quarter ends.

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