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31/07/24
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AUD Inches Down as Inflation Rises
On Wednesday the Australian dollar has inched down and AUD/USD traded at about 0.6525, down 0.14% for the day in the North American session. The Aussie earlier fell by as much as 0.9% and dropped to a low of 0.6479 before rebounding.
There were worries that inflation in Australia was moving in the wrong direction and those fears were justified after today’s CPI release. CPI rose 3.8% y/y in the second quarter, up from 3.6% in Q1.
This was the first acceleration in inflation since the fourth quarter of 2022. Goods and services inflation both rose, as inflation across a host of components accelerated, including housing, transport, and clothing. CPI stayed steady at 1% on a quarterly basis, as per expectations.
A key core inflation indicator, the trimmed mean, eased to 3.9% from 4.0% y/y in the second quarter. Although the trimmed mean has been moving down it is still much higher than the upper level of the 1-3% target range.
The RBA has noted that a rate hike was still a possibility and the increase in headline inflation supports a rate hike. Inflation has however been up and down, and Bank policy members might elect to stall a hike, hoping for better inflation news later this year.
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