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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.