AU Q4 CPI review and what comes next for the AUDUSD?
Australian inflation for Q4 surprised to the upside, continuing a trend seen across many major developed markets in recent months.
Share this:
Headline consumer prices rose by 1.3%, higher than the 1% expected by economists taking the annual inflation rate to 3.5%. The trimmed mean or core inflation (the RBA’s preferred gauge of inflation) rose by 1%, taking the annual rate to 2.6% y/y, its highest level since Q3 2008.
Notably, the annual rate of core inflation is now above the mid-point of the RBA’s target 2-3% band for the first time since mid-2014, an indication inflation is sustainably higher.
As expected, the rise in inflation was driven by the rising costs of new dwelling construction and a rise in petrol prices, which together accounted for almost half of the quarterly increase in CPI.
While some of the rise in inflation was related to Covid disruptions, the higher starting point means that should the RBA see wages inflation growth accelerate as expected by the middle of the year, a rate hike in the second half of 2022 is becoming increasingly likely. More so given last week's robust employment data that saw the unemployment rate fall to 4.2%.
The prospect of higher interest rates boosted the AUDUSD from .7150 pre the data up to a high of .7175. However, with risk assets including the ASX200 and US equity futures trading heavily during the session, there has been little in the way of follow-through buying.
Technically the preferred view is that the AUDUSD has completed a medium-term low at .6993 and can continue to grind higher within the trend channel below in the coming weeks towards .7400c.
Source Tradingview. The figures stated areas of January 25th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
How to trade with City Index
You can trade with City Index by following these four easy steps:
- Open an account, or log in if you’re already a customer
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
- Search for the company you want to trade in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
Headline consumer prices rose by 1.3%, higher than the 1% expected by economists taking the annual inflation rate to 3.5%. The trimmed mean or core inflation (the RBA’s preferred gauge of inflation) rose by 1%, taking the annual rate to 2.6% y/y, its highest level since Q3 2008.
Notably, the annual rate of core inflation is now above the mid-point of the RBA’s target 2-3% band for the first time since mid-2014, an indication inflation is sustainably higher.
As expected, the rise in inflation was driven by the rising costs of new dwelling construction and a rise in petrol prices, which together accounted for almost half of the quarterly increase in CPI.
While some of the rise in inflation was related to Covid disruptions, the higher starting point means that should the RBA see wages inflation growth accelerate as expected by the middle of the year, a rate hike in the second half of 2022 is becoming increasingly likely. More so given last week's robust employment data that saw the unemployment rate fall to 4.2%.
The prospect of higher interest rates boosted the AUDUSD from .7150 pre the data up to a high of .7175. However, with risk assets including the ASX200 and US equity futures trading heavily during the session, there has been little in the way of follow-through buying.
Technically the preferred view is that the AUDUSD has completed a medium-term low at .6993 and can continue to grind higher within the trend channel below in the coming weeks towards .7400c.
Source Tradingview. The figures stated areas of January 25th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
- Open a Forex.com account, or log in if you’re already a customer.
- Search for the pair you want to trade in our award-winning platform.
- Choose your position and size, and your stop and limit levels.
- Place the trade.
Open an account in minutes
Experience award-winning platforms with fast and secure execution.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
USD/CAD Outlook: Loonie left behind as US CPI looms
USD/CAD's sharp rebound has coincided with widening US–Canada interest rate differentials. With US CPI approaching and bullish momentum building, another breakout may be on the cards.
Japanese Yen Outlook: EUR/JPY and GBP/JPY Outbid USD/JPY
The Japanese yen starts the week mixed, with EUR/JPY and GBP/JPY showing bullish potential while USD/JPY remains stuck in a rut.
Gold Forecast: XAU/USD Holds Firm Ahead of U.S. CPI Data
Over recent trading sessions, stability has become an increasingly important characteristic of gold's price action. Since the beginning of last week, the metal has gained more than 5.0%, reflecting that buying pressure has remained relatively consistent in the short term.
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.