When is the Aussie CPI data and how could it affect AUD/USD?

Early Wednesday in Asia, the Australian Bureau of Statistics (ABS) will roll out third quarter (Q3) inflation numbers for Australia at 00:30 GMT. The release will include the headline Consumer Price Index (CPI) the Reserve Bank of Australia’s (RBA) Trimmed Mean CPI.

Market consensus favor sustained downbeat price pressure in the Australia economy raising support for the RBA’s easy money policy. That said, the CPI is likely being soft around 0.5% from 0.6% prior to the Quarter-on-Quarter (QoQ) basis while expectedly rising to 1.7% from 1.6% earlier on the Year-on-Year (YoY) format. Further, RBA Trimmed Mean CPI could remain static at 0.4% on QoQ and 1.6% on YoY, as per the forecasts.

TD Securities seems to have a bit upbeat expectations from the data as it says:

We forecast Q3 headline inflation to edge up 0.6%/q (prior 0.4%) on alcohol, food & tobacco, with fuel providing some offset. This takes annual headline CPI to 1.8% from 1.6%. Underlying inflation is expected to remain a touch below 0.4%/q, keeping core inflation ~1.5%/y. However this outcome is unlikely to trigger the RBA to cut next month.

Westpac follows the suit but gives details of reaction while saying:

Australia’s Q3 CPI data is due at 11:30am Syd/8:30am Sing/HK. The median forecast is 0.5%qtr, 1.7%yr overall (from 1.6% in Q2) and 0.4%qtr, 1.6%yr on the trimmed mean CPI, the RBA’s preferred core measure. Westpac looks for a slightly higher headline reading of 0.6%qtr, 1.8%yr, led by food (drought playing a role), alcohol & tobacco and holiday travel & accommodation. But importantly, we look for a sub-consensus 0.3%qtr, 1.5%yr on the trimmed mean CPI and 0.3%qtr, 1.2%yr on the other RBA core measure, weighted median. While the RBA has been talking mostly about the unemployment rate in recent months, every CPI report is important for its forecasts which are updated just after the release. A core CPI reading in line with our expectations should keep markets pricing in a reasonable risk of another rate cut before year-end.

Challenges to RBA’s Lowe?

In his recent public appearance, the RBA Governor turned down odds of any negative rates from the Aussie central bank as he said, “it is extraordinarily unlikely that we will see negative interest rates in Australia.” Even if the upbeat tone helped the AUD/USD pair, for the time being, a weak reading will challenge the central banker’s optimism.

How could it affect AUD/USD?

Considering the recent shift in market’s risk sentiment, mainly due to the political plays surrounding the United States (US), Syria, China and the United Kingdom (UK), any upbeat reading will have to be strong enough to entertain buyers ahead of the key Federal Reserve meeting and the US GDP data. If the price pressure keeps being soft, odds concerning the RBA moving closer to negative rates increase, which in turn will drag AUD/USD down from its multi-day high.

Technically, 0.6884/95 area including September/October month high acts as the key upside barrier for the pair that holds the gate for its further run-up to July 10 low of 0.6910 and 0.955 resistance. Meanwhile, the 50-day Exponential Moving Average (EMA) level of 0.6812 can lure sellers during the pullback.

Key Notes

AUD/USD stays on the front-foot ahead of Aussie CPI, Fed rate decision

AUD/USD Analysis: Bullish potential, sellers around 0.6900

About the Australia Consumer Price Index (CPI)

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 purchase power of AUD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. A high reading is seen as positive (or bullish) for the AUD, while a low reading is seen as negative (or Bearish).

About the Australia RBA Trimmed Mean CPI

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.