The Australian dollar set to be rattled by today's inflation report

Photo by David McNew/Getty Images

Continuing the familiar pattern seen in recent months, the Australian dollar lifted in overnight trade following another surge in crude oil futures and lacklustre economic data from the Unites States.

As a 7.55am AEST, the AUD/USD buys 0.7744, up 0.5% on Monday’s closing level. The pair briefly touched a high of 0.7765 in overnight trade, the highest level seen since Friday last week.

“It’s been a night of relative flatness in European and US equities, OK-to-softer US data reads and mixed on the commodity front, with oil standing above the pack, WTI [West Texas Intermediate] up $1.53 to $44.16 and Brent up $1.52 to $46. That seems to have been enough to lend some support to the commodity currencies with the AUD among the best performers of the top FX currencies,” said David de Garis, senior economist at the NAB in his morning note.

AUD/USD 1-Hour Chart

While movements in the crude price and offshore economic data drove the movements in the Australian dollar overnight, de Garis believes most market attention today will be on the release of Australia’s March quarter consumer price (CPI) report at 11.30am AEST, a noted market mover for the Aussie.

Although some believe that a very soft core CPI print may be enough to see the RBA cut rates when it next meets on May 3, de Garis believes that while there’s likely to be volatility around the release, it’s unlikely to be enough to warrant a monetary policy response from the RBA, at least in the short term.

“While the market is very sensitive to the CPI and the AUD and rates markets might see an immediate knee-jerk reaction, the market is not hanging on this number as one that might swing the RBA into action or inaction at upcoming meetings,” says de Garis.

“The argument to keep rates steady has been won — at least for now — by the better domestic activity reports over recent months keeping the RBA relatively comfortably on hold, and with a more resilient AUD.”

Markets are looking for core inflation — the reading closely monitored by the RBA — to have risen 0.5% for the quarter, leaving the annual rate at 1.95%, below the RBA’s 2-3% medium-term inflation target.

For those looking for further information before this important data release, here’s a quick 10-second guide to bring you up to speed.

Outside of the CPI report, markets will also receive the latest ANZ-Roy Morgan Australian weekly consumer confidence report along with New Zealand trade data, Chinese industrial profits for March along with second-tier data releases from Japan.

The US Federal Reserve will also release its April FOMC monetary policy decision tomorrow morning at 4am AEST, kicking off what will be a busy session for central bank policy announcements on Thursday in Asia with the RBNZ and BOJ also on tap.

Here’s the current Australian dollar scoreboard.

  • AUD/USD 0.7744 , -0.0003 , -0.04%
  • AUD/JPY 86.16 , -0.06 , -0.07%
  • AUD/CNH 5.0334 , -0.0035 , -0.07%
  • AUD/EUR 0.6853 , -0.0003 , -0.04%
  • AUD/GBP 0.5314 , 0.0002 , 0.04%
  • AUD/NZD 1.1213 , -0.0011 , -0.10%

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