CPI Data Key To RBA Rate Cuts And Aussie Direction: April 24, 2012
Fan Yang | Apr 23, 2012 05:54PM ET
In the upcoming Asian session we will get the release of the Australian CPI data for the first quarter. We had a prelude, the curtain opener, to that report in Monday’s mornings Asian session as producer prices in Australia fell 0.3% in the first quarter, a reading that was a good deal below the forecast a 0.5% gain. With producer prices falling that should filter down into weaker consumer prices in the coming quarter, inflation pressures should remain subdued.
In terms of consumer prices, CPI is expected to climb 0.8% in the first quarter, the the annual pace is expected to drop to 2.2% from the fourth quarter’s 3.1%. That would bring the annual inflation rate back within the RBA’s target of 1%-3% and would be the weakest reading we’ve had since the 4th quarter of 2009. The RBA itself has signaled that muted inflation from this data release would open the door for rate cuts in order to help the domestic economy – which is growing slower than the RBA has anticipated.
As a result, we should see the Australian dollar pressured as those expectations continue to be priced in. A weaker aussie is also being helped by risk aversion as a result of concerns around Europe which is pressuring commodity currencies.
AUD/USD – Will Bearish Trend From March Resume? The fundamental bias for the pound has improved as a result of the lessening chance of quantitative easing from the Bank of England as well as relatively better data in terms of labor market and the retail sales that came out last week. This pair has come a long way since the middle of February and most recently reached the 1.55 level – a level of resistance that had held in the early part of April.
After bouncing off that resistance and using the 200-daily EMA as support, the pair has breached that old resistance, coming to the next important level at 1.5670. If we have further pressure on the Australian dollar, then the GBP/AUD could make a run towards the highs seen in the middle-late part of November at 1.6050.
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