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

Early Wednesday in Asia, at 00:30 GMT elsewhere, the Australian Bureau of Statistics (ABS) will roll out the fourth quarter (Q4) inflation numbers for Australia. The releases will include the headline Consumer Price Index (CPI) the Reserve Bank of Australia’s (RBA) Trimmed Mean CPI.

Despite recently released upbeat employment data, Tuesday’s Aussie numbers keep the odds of further weakness in Australian economics high, which in turn support the RBA’s easy money policy. That said, the CPI is likely recovering from 0.5% prior to 0.6% on the QoQ basis while expected to remain unchanged at 1.7% on YoY format. Further, RBA Trimmed Mean CPI could remain static at 0.4% on a quarterly basis but might step back to 1.5% from 1.6% on YoY, as per the forecasts.

TD Securities seems to consider today’s data as a non-event as their analysts said:

We don't expect the CPI outcome will influence the RBA's Feb rate decision. The RBA forecasts headline to come in at 0.7%, placing an annual headline at 1.9%. Driving the Q4 outcome is higher tobacco, petrol and food prices, accounting for ~half of the quarterly rise. The MI inflation gauge suggests the core should remain subdued. We pencil in +0.4% q/q, +1.5% y/y as per the RBA f/c.

Westpac highlights the odds of RBA’s easy money policy:

Australia’s Q4 CPI report is again expected to show a weak underlying inflation trend, the trimmed mean core CPI to print at 0.4%, 1.5% yearly. Auto fuel and tobacco will boost headline inflation in the quarter (WBC and market are at 0.6%), but annual headline inflation will remain below the RBA’s 2-3% yearly target range, circa 1.8% YoY.

How could it affect AUD/USD?

Considering the recent shift in the market’s risk sentiment, mainly due to the positive headlines from China, any upbeat reading can help buyers ahead of today’s Federal Reserve meeting. If the price pressure keeps being soft, odds concerning the RBA moving closer to negative rates increase, which in turn will pull AUD/USD below its multi-week low.

Technically, a confluence of 100-day SMA and an upward sloping trend line since October, the previous support, around 0.6840 now, become the key to watch as a break of which could call buyers targeting 0.6900 mark. On the contrary, 0.6700 and October 2019 low near 0.6670 are on the bears’ radar during further declines.

Key Notes

AUD/USD recovers from multi-week low to 0.6760 ahead of Aussie Q4 CPI

AUD/USD Forecast: Bearish ahead of Australian quarterly inflation data

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.