When is Australia inflation data and how could it affect AUD/USD?

Overview

Australia’s Monthly Consumer Price Index (CPI) for May, scheduled for publishing on early Wednesday around 01:30 GMT, appears the crucial data for the AUD/USD pair traders to watch.

The reason could be linked to the Reserve Bank of Australia’s (RBA) consecutive two hawkish surprises after witnessing upbeat CPI data.

It’s worth noting that markets expect 6.1% YoY print of the Aussie inflation data, versus 6.8% prior, which in suggests easing inflation pressure and a challenge for the Aussie bulls.

Ahead of the release, Citibank says,

The Citi Research forecast based on high-frequency indicators suggests that monthly headline inflation decelerated sharply in May from 6.8% to 6.1%, implying a MoM increase of 0.1%. However, markets should ignore the monthly headline price movements and instead focus on the components because not every expenditure class is measured monthly. In May, 64% of services and 76% of goods prices are updated. Overall, 71% of the basket was measured in May. The details will still point to hawkish risks outside volatile categories, and the RBA will likely hike again by 25 bps in July and August.

How could AUD/USD react to the news?

AUD/USD takes offers to refresh intraday low near 0.6675, printing mild losses of late, as it reverses the previous day’s recovery moves amid the risk-negative headlines about China and hawkish Fed bets backed by upbeat US data. It should be noted that the hopes of witnessing downbeat Aussie inflation also weigh on the Aussie pair prices of late. Furthermore, the cautious mood ahead of Federal Reserve Chairman Jerome Powell’s speech also weighs on the risk-barometer pair ahead of the key Aussie data.

That said, the market players’ downbeat expectations contrast with the positive early signals for Aussie inflation and keep the AUD/USD traders on a dicey floor. Hence, a surprisingly upbeat Monthly CPI, one beyond 6.8%, won’t hesitate to bolster the hawkish RBA bets and propel the AUD/USD price. However, the run-up will also depend upon how well Fed Chair Jerome Powell manages to convince markets that the last pause in the rate hike isn’t a prolonged one.

As a result, upbeat data may only provide a knee-jerk reaction to the AUD/USD prices while defending the overall bearish trend unless marking a heavy positive surprise, which is less expected.

Technically, the AUD/USD pair’s repeated failures to provide a daily closing beyond the 200-DMA, around 0.6695 by the press time, keep the sellers hopeful.

Key notes

Australia CPI Preview: Forecasts from five major banks, easing annual inflation 

AUD/USD slides below 0.6700 as Australia inflation, Fed Chair Powell’s speech loom

About Aussie Consumer Price Index

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.