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

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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)