The Australian dollar is getting slammed after low inflation opens the door for a rate cut

RIO HONDO, SANTIAGO DEL ESTERO – APRIL 03: Adam Norrodin of Malaysia and Drive M7 SIC Racing Team crashed out during the Moto3 Race during the MotoGp of Argentina – Race at Termas De Rio Hondo Circuit on April 03, 2016 in Rio Hondo, Argentina. (Photo by Mirco Lazzari gp/Getty Images)

The Australian dollar has fallen close to a full cent in the aftermath of the lower than expected print for first quarter CPI. There was little wriggle room under the market’s expectation of a 0.2% print for headline CPI. But the much lower than expected print of -0.2% was much weaker than expected. On top of that, the print for core CPI of just 0.15% has brought the year on year rate down to just 1.55%.

That’s well below the bottom of the RBA’s 2-3% band and suggests Australia has the same problem that the rest of the developed world has – a lack of inflation.

That opens the door to an RBA rate cut should the economy need it and forex traders are selling the dollar as a result.

Here’s the chart of the price action in the immediate aftermath of the CPI release.

AUDUSD 5 minute Chart (MT4, AxiTrader)

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.