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- When is the Australia Q2 inflation data and how could it affect the AUD/USD?
When is the Australia Q2 inflation data and how could it affect the AUD/USD?
Australian CPI overview
Early on Wednesday, at 01:30 GMT, markets will see the 2022’s second quarter (Q2) inflation data for the Australian economy.
The headline Consumer Price Index (CPI) QoQ is likely to ease to 1.8% QoQ from 2.1% prior but may improve to 6.2% on YoY versus 5.1% in previous readings.
On the contrary, the Reserve Bank of Australia's (RBA) trimmed-mean CPI is expected to remain mostly unchanged on the QoQ basis at 1.5% but may rise to 4.7% versus 3.7% prior.
Given the recently strong Aussie jobs report and RBA’s hawkish comments, AUD/USD bulls will pay close attention to the key inflation report for backing their bias toward the Reserve Bank of Australia’s (RBA) aggressive rate hike.
Ahead of the release, FXStreet’s Yohay Elam states,
Australia's CPI data is published less than 24 hours before the US Federal Reserve's decision. Tension toward the all-important event in America could marginally limit the reaction in AUD/USD, but it would still be significant. Australia publishes inflation figures only once per quarter, making every publication a considerable market mover.
On the same line were comments from Westpac stating,
In terms of key drivers, ongoing construction input inflation should see a solid lift in dwelling prices, while food and auto fuel components are also primed for a strong contribution. Westpac’s forecast of a 1.7%qtr (6.1%yr) lift in the headline CPI are slightly lower than the market’s (1.9%qtr; 6.3%yr). Widespread pressures from both domestic and international sources will support a solid 1.4%qtr (4.6%yr) gain in the trimmed mean measure.
How could it affect the AUD/USD?
AUD/USD struggles for clear directions as it seesaws near 0.6950 ahead of the key inflation data. The pair’s latest inaction could also be linked to the market’s cautious mood before the Federal Open Market Committee (FOMC) meeting and Thursday’s likely virtual meeting between US President Joe Biden and his Chinese counterpart Xi Jinping.
Given the inflation fears joining the hawkish RBA commentary, today’s Aussie inflation data may help the AUD/USD prices to consolidate recent losses. However, the existence of the Fed’s monetary policy on Wednesday might restrict the data’s capacity to move the pair.
Technically, sustained trading below the 21-DMA level surrounding 0.6850 appears necessary for the AUD/USD bears to retake control. Alternatively, a downward sloping resistance line from mid-April, near 0.6950, precedes the monthly peak of 0.6983 to restrict short-term advances of the pair. That said, MACD and RSI (14) hint at the pair’s further upside.
Key Notes
Australian CPI Preview: Why inflation is set to exceed estimates, and where AUD/USD could go
AUD/USD retreats towards 0.6900 on recession woes, Aussie inflation, Fed in focus
About the Australian CPI
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).
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