Buying the Retreat in AUD/USD After Lower CPI Inflation Numbers
The Aussie has been showing resilience lately, despite slowing economic activity in Australia. It seems like the economic slump in China has reached a bottom, helping risk sentiment and commodity dollars, while a dovish reversal in the FED has been dragging the USD, benefiting AUD/USD, which has moved above 0.66.
Yesterday we had the inflation report from Australia for October although the numbers had no substantial impact on the Australian Dollar. The Australian Bureau of Statistics stated on Wednesday that the monthly Consumer Price Index increased by 4.9% in the year to October, which was somewhat lower than the market estimate of 5.2% and lower than the 5.6% recorded in September.
Australian October 2023 CPI Inflation YoY
- October CPI YoY 4.9% vs. 5.2% expected
- September CPI YoY was 5.6%
- Trimmed mean inflation YoY 5.3% in October, down slightly from the rise of 5.4% in September
- Goods inflation YoY 4.6%, down from 5.7% in September
- Services inflation 5% down from from 5.3%
- CPI MoM for October was -0.4% compared with September’s +0.3%
- Construction work done during Q3 +1.3% vx 0.3% expected
- Construction work done during Q2 was 0.4%
There were rumours for a rate hike by the RBA in next week’s meeting, but the CPI would have to rise considerably, as the Bank has been waiting for the quarterly CPI figures since slowing its hike-every-meeting pace. With the 7-point decline in the headline number, I believe we can put the RBA December rate hike to rest. The only quibble is the core, trimmed mean, which did not fall significantly from its previous reading but remains on a slowing trend nonetheless.
The Australian dollar retreated lower after the inflation report yesterday and it sank even further in response to the lower-than-expected headline, but it was also due to the USD making a slight comeback. Now a rate hike from the Reserve Bank of Australia on the 5th December meeting looks very doubtful indeed. Nonetheless, we decided to open a buy AUD/USD signal yesterday after the pullback.
AUD/USD Live Chart
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