|

Breaking: Australia’s CPI inflation climbs to 4.6% YoY in March vs. 4.7% expected

Australia’s Consumer Price Index (CPI) climbed by 4.6% year-over-year (YoY) in March, compared to a 3.7% increase reported in the previous reading, the latest data published by the Australian Bureau of Statistics (ABS) showed on Wednesday.

The market consensus was for 4.7% growth in the reported period.  

The RBA Trimmed Mean CPI for March rose 0.3% and 3.3% on a monthly and and annual basis, respectively. The monthly Consumer Price Index came in at 1.1% in March, compared to the previous reading of 0%.

AUD/USD reaction to Australia's Consumer Price Index data

The Australian Dollar (AUD) attracts some sellers following the Australia's CPI report. The AUD/USD pair is losing 0.15% on the day to trade at 0.7170, at the press time.

Australian Dollar Price Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Swiss Franc.

USDEURGBPJPYCADAUDNZDCHF
USD-0.01%-0.03%-0.02%0.02%0.16%-0.05%-0.06%
EUR0.00%-0.03%0.00%0.02%0.16%-0.03%-0.06%
GBP0.03%0.03%0.02%0.04%0.17%-0.01%-0.04%
JPY0.02%0.00%-0.02%0.03%0.18%-0.01%0.00%
CAD-0.02%-0.02%-0.04%-0.03%0.17%-0.05%-0.06%
AUD-0.16%-0.16%-0.17%-0.18%-0.17%-0.19%-0.26%
NZD0.05%0.03%0.00%0.00%0.05%0.19%-0.03%
CHF0.06%0.06%0.04%-0.01%0.06%0.26%0.03%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).


This section below was published at 23:32 GMT on Tuesday as a preview of the Australia’s CPI inflation report

The Australia monthly CPI overview

The Australian Bureau of Statistics (ABS) will publish its data for March on Wednesday at 01.30 GMT. The Consumer Price Index (CPI) is expected to see a rise of 4.7% YoY in March, compared to 3.7% in February. 

The CPI measures the changes in the price of a comprehensive basket of goods and services acquired by household consumers. The indicator is the primary measure of headline inflation after a new methodology was applied to transition from quarterly to monthly readings, applying to data from April 2024 onwards. 

How could the Australia monthly CPI affect AUD/USD?

AUD/USD trades on a negative note on the day in the lead up to the Australia monthly CPI data. The pair declines as the US Dollar (USD) strengthens amid uncertainty over US-Iran peace talks and the closure of the Strait of Hormuz.

If data comes in hotter than expected, it could lift the Australian Dollar (AUD), with the first upside barrier seen at the 0.7200 psychological level. The next resistance level emerges at the April 17 high of 0.7222, en route to the weekly high of May 30, 2022 at 0.7283.

To the downside, the April 27 low of 0.7131 will offer some comfort to buyers. Extended losses could see a drop to the 0.7100, round figure. The next contention level is located at the March 13 low of 0.6980.

RBA FAQs

The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

Author

Lallalit Srijandorn

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

More from Lallalit Srijandorn
Share:

Editor's Picks

AUD/USD sticks to neutral bias above 0.7100 amid cautious markets

AUD/USD holds steady above 0.7100 in the Asian session on Monday as the US Dollar stalls its modest pullback from the highest level since late July amid persistent geopolitical uncertainties. The PBOC status quo on Loan Prime Rates also weighs on the Aussie. However, bets on another RBA rate hike continue to underpin the Australian Dollar ahead of the Trump-Xi Summit.

USD/JPY eases below 157.00 amid looming intervention risks

USD/JPY is easing back below 157.00 in Asia on Monday, undermined by modest Japanese Yen strength amid looming intervention risks after Friday's BoJ rate check. A Japanese holiday also keeps traders on edge amid escalating geopolitical tensions between Russia and Ukraine and in the Middle East. As a result, the US Dollar pauses its pullback, limiting the pair's downside.

Gold remains depressed below $4,400 as hawkish Fed, Mideast jitters support USD

Gold struggles to capitalize on its recovery gains registered over the past two days and attracts fresh sellers at the start of a new week on Monday. The risk of a broader Middle East conflict helps the safe-haven US Dollar stall Friday's retracement slide from the highest level since late July. Moreover, the Fed's hawkish outlook supports the buck and keeps the non-yielding bullion depressed below $4,400.

The week ahead: Hawkish Fed sets the tone for flash PMIs, SNB decides on policy
The US dollar outperformed all its major peers this week, putting it on the front foot in anticipation of a hawkish Fed before Wednesday, and accelerating its advance after the central bank satisfied the hawkish market bets.
Houthis claim attacks on Saudi capital, thick smoke seen near Riyadh airport 
Yemen’s Houthis said that they attacked “sensitive” sites in the Saudi capital Riyadh with missiles and drones, hours after flames and a large plume of smoke were seen near the city’s main airport, the Guardian reported on Saturday. Saudi Arabia sent alerts overnight warning of potential danger around Riyadh.
BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.