Australian CPI overview
Early on Wednesday, at 01:30 GMT, markets will see 2021’s first quarter (Q1) inflation data for the Australian economy.
The headline Consumer Price Index (CPI) QoQ is likely to remain unchanged around 0.9% but the YoY figures may rise to 1.4% from 0.9% prior.
Further, the Reserve Bank of Australia's (RBA) trimmed-mean CPI is expected to stand pat on the YoY readings of 1.2% while the CPI QoQ may print a mild uptick from 0.4% to 0.5%.
Ahead of the release, Westpac said:
Westpac is forecasting a 1.0% rise in the Q1 CPI (market median is 0.9%) which will lift the annual rate to 1.5%yr. The trimmed mean is forecast to rise 0.6%qtr which will see the annual rate lift from 1.2%yr to 1.4%yr. The six-month annualized pace of the trimmed mean is forecast to jump from 1.5%yr to 2.2%yr, moving up through the bottom of the RBA’s target band. The weighted median is forecast to rise 0.6%qtr with the annual pace holding at 1.4%yr. Government assistance has had a big impact on the CPI and for the next few quarters the unwinding of those packages is set to boost inflation.
How could it affect the AUD/USD?
According to FXStreet's own Dhwani Mehta, “A data disappointment could be used as an excuse by the investors to trigger a correction in AUD/USD from near multi-day highs above 0.7800. But the price action could be limited by the pre-Fed caution. The Fed is expected to announce its monetary policy decision on Wednesday.”
Alternatively, positive data may offer a short-term bounce to the AUD/USD prices but bulls are likely to be challenged ahead of today’s Fed decision.
On the chart, failures to stay beyond the 0.7800 threshold portray AUD/USD weakness, which in turn drags the quote towards a confluence of a two-week-old rising support line and 50-day SMA, around 0.7720.
Key Notes
AUD/USD: Pressured below 0.7800 on cautious sentiment ahead of Australia Q1 CPI, FOMC
AUD/USD Forecast: Bullish extension unlikely
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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