When is the Aussie Q4 CPI data and how could it affect AUD/USD?


Early Wednesday in Asia, 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) and the Reserve Bank of Australia’s (RBA) Trimmed Mean CPI.

With the coronavirus (COVID-19) resurgence negatively affecting the Aussie data off-late, the RBA’s repeated hesitance to accept the economic weakness, coupled with resistance for negative rates, can be tested by today’s key Australian data. As a result, AUD/USD traders are all eyeing to defy the downbeat forecasts to keep the latest upside momentum.

That said, the headline CPI is likely declining from 1.6% prior to 0.7% on the QoQ basis while expected to remain intact near 0.7% on YoY. Further, RBA Trimmed Mean CPI could also stay unchanged at 0.4% QoQ and 1.2% on YoY, as per the forecasts.

TD Securities seems to consider today’s data as downbeat as their analysts said:

CPI inflation for 4Q to ease to 0.6% y/y (market forecast: 0.7% y/y) from 1.6% y/y in 3Q. The firm CPI print in 3Q was primarily due to the fading of disinflationary effects from school care subsidies and higher automotive fuel prices. For 4Q, we see housing rents remaining a drag on inflation and dwelling prices dampened by government construction grants. However, we see fresh food prices likely to pick up due to seasonal factors and an uptick in tobacco prices is expected on account of the tobacco excise increase.

On the same line, Westpac said:                                                                                                

It is forecasting a 0.7% lift in the CPI which will hold the annual rate steady at 0.7%yr. The trimmed mean is forecast to rise 0.3%qtr which will see the annual rate ease back from 1.2%yr to 1.1%yr which would be a new record low. The six-month annualized pace of the trimmed mean is forecast to lift from 0.6%yr to 1.4%yr, still well below the bottom of the RBA’s inflation target band.

How could it affect AUD/USD?

AUD/USD remains on the front-foot around the weekly top near 0.7750 during the early Asian session on Wednesday. The quote recently cheered the US dollar weakness amid the risk-on mood, mainly backed by the covid vaccine news and the International Monetary Fund’s (IMF) upward revision to the 2021 global economic growth forecast. However, the upside momentum needs to be backed by a surprise positive inflation data, or else the pre-Fed cautious sentiment may drag the quote for a while before hopes of RBA’s easy money favor bulls.

While identifying the same, FXStreet’s Ddwani Mehta said, “The CPI disappointment could prompt the RBA at hinting a potential extension to its quantitate easing (QE) program beyond April, which could save the day for the AUD bulls. An upside surprise to the data could also benefit the Australian dollar amid improving economic prospects. Meanwhile, the market sentiment amid renewed US-China tensions and US stimulus uncertainty could play a key role in the aussie’s price action on the data release.

Technically, sustained trading beyond 0.7640 and 0.7660 key supports, not to forget the confluence of 21-day and 10-day SMA near 0.7730, AUD/USD is up for challenging the descending resistance line from January 06, at 0.7770.

Key Notes

Australian Quarterly CPI Preview: Upside surprise could save the day for the AUD bulls

AUD/USD: Bulls eye key resistance below 0.7800 ahead of Australian Q4 CPI

AUD/USD Forecast: Resuming its advance, 0.7770 key resistance

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.

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