Breaking: Aussie CPI Q4 Trimmed Mean 0.4% ( vs 0.4% expected and prior 0.4%)

Aussie fourth quarterly CPI has arrived with the headline slightly better than expected at +0.7 pct Q/Q vs a Reuters poll +0.6 pct – (slightly AUD bullish). There was also a beat in the YoY Trimmed Mean which is bullish AUD and an upside correction can be expected vs the greenback.

Data as follows

• Trimmed Mean CPI +0.4 pct QoQ (Reuters poll +0.4 pct).
• CPI (all groups) +0.7 pct QoQ (Reuters poll +0.6 pct).
• Q4 RBA weighted median CPI +0.4 pct QoQ (Reuters poll +0.4 pct).
• Q4 RBA Trimmed Mean CPI +1.6 pct YoY (Reuters poll +1.5 pct).
• CPI (all groups) +1.8 pct YoY (Reuters poll +1.7 pct).
• Q4 RBA weighted median CPI +1.3 pct YoY (Reuters poll +1.3 pct).

The Reserve Bank of Australia forecasted Trimmed Mean inflation to come in at 0.4% QoQ and 1.6% YoY, which had been published in the SoMP. No fireworks were expected on anything inline with that, so AUD is only slightly bid. However, the fact that there is a beat on both the Trimmed Mean YoY and in the headline is bullish for the Aussie, especially when coupled with the Aussie jobs data back on the 23rd of this month which showed a positive trend in a falling unemployment rate.

AUD/USD analysis

Before the data: AUD/USD Price Analysis: Levels to consider before Aussie CPI

After the data:  AUD/USD nudged higher on the release and can be expected to continue to correct towards the 0.68 handle. However, risk-off flows and at least some probability of a rate cut in Feb will weigh on any significant advances to the upside. OIS market price in 20% odds of RBA rate cut next week. The hourly technicals are promising, and bulls will be looking for a 4-hour close above 0.6780. 

Editor's notes

Australian RBA's quarterly inflation preview: No chances of a U-turn in AUD/USD. RBA seen on hold next February, despite whatever the outcome of the inflation report. Australian inflation seen below RBA’s target in the final quarter of 2020. AUD/USD bearish and at risk of re-testing a multi-year low at 0.6670.

Description

The Consumer Price Index released by the RBA and republished by the Australian Bureau of Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The trimmed mean is calculated as the weighted mean of the central 70% of the quarterly price change distribution of all CPI components, with the annual rates based on compounded quarterly calculations.