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30/07/24
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AUD Inches Down Before CPI
On Tuesday, the Australian dollar has inched down and AUD/USD traded at about 0.6535, down 0.21% for the day in the North American session.
Early on Wednesday, Australia will release CPI for the second quarter, and it is expected that inflation is going the wrong way. The market forecast for headline inflation is at 3.8% y/y, versus 3.6% in Q1.
Trimmed mean inflation, a key core rate gauge, will likely hold steady at 4.0%. The Reserve Bank of Australia’s inflation target range is between 1% and 3% and if CPI is higher than anticipated, the central bank might have to rate hikes to push persistent inflation down.
The RBA will also be watching the retail sales report due on Wednesday. Market estimates for June are at 0.2% m/m, versus the impressive 0.6% reading for May. Weak consumer spending may mean a problem for the RBA, as a rate hike to push inflation down may push the easing economy into recession.
The inflation and retail sales reports on Wednesday are the last tier-1 releases before the RBA’s meeting on Aug. 5-6 and will be key factors in the rate decision. Money markets have priced in a rate hike at the meeting at about 25%.
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