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26/06/24
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AUD Slightly higher as Inflation Came in Higher Than Forecast
At around 2:05 p.m. on June 26, AUD/USD was trading at 0.6658, representing a 0.13 percent increase on the day. The Australian Bureau of Statistics (ABS) revealed that Australia’s CPI rose from April’s 3.6% to 4.0% last month, relative to a 3.8% forecast and representing the highest level in seven months.
“CPI inflation is often impacted by items with volatile price changes like Automotive fuel, Fruit and vegetables, and Holiday travel. It can be helpful to exclude these items from the headline CPI to provide a view of underlying inflation, which was 4.0 per cent in May, down from 4.1 per cent in April,” said Michelle Marquardt, ABS head of prices statistics.
Australia’s headline inflation has recorded an increase for three consecutive months, raising concerns that the Reserve Bank of Australia (RBA) will hike interest rates at its next meeting on August 6.
The past two meetings involved RBA policy makers discussing the possibility of a rate hike, but they decided to keep rates unchanged. Markets look forward to the Q4 inflation report a week prior to the apex bank’s meeting, as it will be an important factor in the rate decision.
The RBA has left rates unchanged at 4.35 percent for the seventh consecutive time. However, there has been a warning that rates may be hiked if inflation does not fall. Although the somewhat decline in core CPI seemed favorable, it may not be enough to rule out a rate hike in August.
On June 27, Melbourne Institute Inflation Expectations will be released and is expected to rise to 4.3 percent in June, following a 4.1% gain last month. A look at the chart of AUD/USD shows a visit to the support level at 0.6635, with another support level at 0.6591. The bulls need to overcome two barrier levels on the way upward, including 0.6685 and 0.6729.
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