Australian CPI overview
Early on Wednesday at 01:30 GMT will see 2019’s first quarter inflation data dump for the Australian economy, and the headline q/q CPI reading is expected to come in at 0.2% versus previous quarter’s reading of +0.5%.
The Reserve Bank of Australia’s (RBA) trimmed-mean CPI is also expected to arrive at 0.4%, steady from the previous period’s 0.4%, while the annualized CPI is expected to show 1.7%, a soft decline from the previous 1.8%.
Ahead of the release, TD Securities said:
We expect 1.8% y/y for headline CPI (mkt +1.5%) and +1.75% for core (mkt 1.65% y/y). Tobacco, Housing and Health are the main contributors, the main drag from Transport (i.e. fuel (-10% q/q)) and Communication (-0.3% q/q). Annual core inflation at 1¾% y/y leaves the RBA on the sidelines but a significant downside miss (of around -½%pt) has been a trigger for a cut before (May 2016). Also released is skilled vacancies for March. This measure was solid, but dipped in February.
How could it affect the AUD/USD?
According to FXStreet’s own Valeria Bednarik, weak inflation numbers could see the AUD/USD pair testing 0.7000 mark. She further adds:
The 4 hours chart shows that the pair broke below all of its moving averages, while the 20 SMA already crossed below the 100 SMA, both some 40/50 pips above the current level. The Momentum indicator has pared its decline at its lowest in a month, while the RSI indicator maintains its downward strength, currently at 26, both supporting additional declines ahead, to be confirmed with a break below the 0.7050/60 price zone, where the pair has multiple intraday lows from last March.
Support levels: 0.7055 0.7020 0.6980
Resistance levels: 0.7115 0.7140 0.7170
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 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).