Early on Wednesday, at 01:30 GMT, markets will see 2021’s first quarter (Q1) inflation data for the Australian economy.
The headline Consumer Price Index (CPI) QoQ is likely to remain unchanged around 0.9% but the YoY figures may rise to 1.4% from 0.9% prior.
Further, the Reserve Bank of Australia’s (RBA) trimmed-mean CPI is expected to stand pat on the YoY readings of 1.2% while the CPI QoQ may print a mild uptick from 0.4% to 0.5%.
Ahead of the release, Westpac said:
Westpac is forecasting a 1.0% rise in the Q1 CPI (market median is 0.9%) which will lift the annual rate to 1.5%yr. The trimmed mean is forecast to rise 0.6%qtr which will see the annual rate lift from 1.2%yr to 1.4%yr. The six-month annualized pace of the trimmed mean is forecast to jump from 1.5%yr to 2.2%yr, moving up through the bottom of the RBA’s target band. The weighted median is forecast to rise 0.6%qtr with the annual pace holding at 1.4%yr. Government assistance has had a big impact on the CPI and for the next few quarters the unwinding of those packages is set to boost inflation.
According to FXStreet’s own Dhwani Mehta, “A data disappointment could be used as an excuse by the investors to trigger a correction in AUD/USD from near multi-day highs above 0.7800. But the price action could be limited by the pre-Fed caution. The Fed is expected to announce its monetary policy decision on Wednesday.”
Alternatively, positive data may offer a short-term bounce to the AUD/USD prices but bulls are likely to be challenged ahead of today’s Fed decision.
On the chart, failures to stay beyond the 0.7800 threshold portray AUD/USD weakness, which in turn drags the quote towards a confluence of a two-week-old rising support line and 50-day SMA, around 0.7720.
Key Notes
AUD/USD: Pressured below 0.7800 on cautious sentiment ahead of Australia Q1 CPI, FOMC
AUD/USD Forecast: Bullish extension unlikely
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 purchasing 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).
