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Talking Points

• AUD/USD soared after 3Q CPI data beat expectations

• 3Q CPI 1/3% y/y vs. 1.1% expected and 1.0% y/y in 2Q

• RBA has maintained firm wait-and-see policy stance

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The Australian Dollar soared after Australia’s 3Q consumer price index figures topped economists’ forecasts, hinting RBA rate cut expectations have continued to fade. The headline year-on-year inflation rate registered at 1.3 percent versus 1.1 percent expected. This marks a rebound from after price growth registered at the slowest since 1999 at 1 percent in the second quarter. The annualized trimmed mean CPI figure, a measure of the core inflation trend that the RBA follows closely, crossed the wires in line with expectations at 1.7 percent.

The Aussie rose alongside front-end bond yields after the data was released, which may suggest that the market took the outcome to mean that the probability of an RBA interest rate cut in the near term has diminished. However, priced-in expectations ahead of the announcement already pointed away from the likelihood of an imminent policy change on the horizon. Furthermore, recent RBA rhetoric has struck a cautiously upbeat tone and signaled preference for a wait-and-see approach.

original source

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