Australian CPI overview
Early on Wednesday, at 01:30 GMT, markets will see 2021’s second quarter (Q2) inflation data, for the Australian economy.
The headline Consumer Price Index (CPI) QoQ is likely to inch up from 0.6% to 0.7% but the YoY figures bear an upbeat forecast to jump to 3.8% from 1.1% prior.
Further, the Reserve Bank of Australia's (RBA) trimmed-mean CPI is also expected to rise from 1.1% to 1.6% whereas the QoQ figures may print an uptick to 0.5% from 0.3% previous readouts.
Although the RBA policymakers have already conveyed their bearish bias and readiness to hold the monetary policy unchanged until witnessing multiple quarters of inflation above 2.0%, today’s inflation data will be the key as it will portray the heating price pressure.
Ahead of the release, Westpac said:
In terms of key drivers, demand for dwellings has surged due to low interest rates and the HomeBuilder grants. We are seeing a temporary boost to the CPI from a spike in fresh fruit & vegetable prices, while the surge in crude oil prices and a weaker AUD has boosted auto fuel prices. There was a seasonal lift in health costs associated with the annual health premium reset. Offsetting the gains in Q2 are falling prices for both domestic and international holidays and travel due to government subsidies for airfares and increasing competition. Market consensus is for a 0.7% rise (3.7% year). Westpac is looking for a 0.9% (4.0% year) rise in the headline CPI, and a 0.5% (1.6% year) rise in the trimmed mean measure.
How could it affect the AUD/USD?
AUD/USD remains sidelined between 0.7370 and 0.7350, recently bid near 0.7365, ahead of the key inflation data release. Being the risk barometer, the quote justifies the market’s cautious sentiment ahead of the Federal Open Market Committee (FOMC) verdict. Also challenging the pair moves could be the covid woes in Australia and a downbeat mood elsewhere, mainly due to China’s crackdown on IT and private tuitions.
That said, today’s Aussie inflation figures may trigger intraday buying should they match the upbeat forecasts, despite the RBA’s rejection to respect the spike. However, as the markets await Fed, no major reaction to the data is anticipated unless witnessing extreme numbers. Meanwhile, downbeat figures will exert additional pressure on the AUD/USD prices.
Technically, the pair retreats below the monthly resistance line, around 0.7405, signaling another battle with the 0.7340 support on the way to the month’s low, also the lowest since November 2020, near 0.7290.
Key Notes
AUD/USD: Bulls and bears jostle below 0.7400, Australia Q2 CPI, Fed eyed
AUD/USD Forecast: Consolidating near 2021 lows
About the Australian 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 purchasing 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).
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