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15/05/24
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AUD Up as Wage Growth Dips
On Wednesday, the Australian dollar managed to extend its gains, and AUD/USD traded at about 0.6642, up 0.24% in the European session.
In the first quarter, wages in Australia rose less than expected, an indication that inflationary pressures may be cooling.
In the first quarter, the wage price index was 0.8% higher q/q, down from Q4 2023’s revised 1% and lower than the 0.9% market estimate. This was the lowest gain since the fourth quarter of 2022. Wages ticked lower from 4.2% in the fourth quarter to 4.1% on an annualized basis and lower than the market estimate of 4.2%.
The decline in wage growth may be an indication that wage demands have crested, which may indicate that inflation will cool down over the rest of the year. The Reserve Bank of Australia has forecast that inflation, currently at 3.6%, won’t drop to within the 2-3% target band until next year and markets don’t expect a rate cut before Nov.
The focus is on the US CPI report. It is expected headline CPI will in April drop to 3.4% y/y, down from March’s 3.5%.
Headline CPI is expected to stay unchanged at 0.4% monthly. Core CPI will likely ease to 3.6% from 3.8% y/y, and monthly to 0.3% from 0.4%.
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