Australian Dollar Jumps as RBA Preferred CPI Beats Estimates. Can AUD/USD Go Higher?

Australian Greenback, AUD/USD, US Greenback, CPI, RBA, Vitality – Speaking Factors

  • Australian Greenback leapt up as CPI Trimmed Imply overshot expectations
  • The inflation outlook seems cussed for central banks as vitality costs soar
  • The RBA is unlikely to alter course. What does it imply for AUD/USD?

The Australian Greenback rose instantly after the Australian CPI numbers right now. Third quarter headline inflation got here in at 0.8% q/q in opposition to expectations of 0.8%. The annual headline fee got here in 3.0% y/y versus 3.1% forecasted. The RBA’s most popular measure of trimmed imply printed at 0.7% q/q as an alternative 0.5% anticipated, which made the annual learn 2.1% y/y in opposition to 1.8% anticipated.

Because of this headline CPI had some downward revisions, however trimmed imply had some upward revisions.

The threerd quarter noticed greater than 50% of the Australian inhabitants in lockdown and financial exercise was understandably anticipated to fall away. Consequently, value pressures had been additionally anticipated to be benign. The uptick within the trimmed imply CPI is just not fascinating for the RBA, however it’s unlikely to be sufficient to alter their tightening agenda.

Globally, inflation is a scorching subject. Provide chain points apart, vitality costs have sky-rocketed over the previous few months because the northern hemisphere prepares to enter winter. A variety of components have led to demand out-stripping provide.

In North America, a difficult hurricane season within the Gulf of Mexico sapped output. Looking throughout the Atlantic, a damaged gasoline pipe between the UK and Europe and Russia holding out on the EU to get their pipe below the Balkans accredited stored costs afloat. In the meantime, China and India are competing for energy to cut back rolling blackouts. That is because the Asian hurricane season wreaks havoc and closes a number of mines. Delivery prices are by means of the roof as ports stay clogged attributable to Covid and OPEC+ below supplying oil.

Because the world vaccinates and reactivates economically, a few of these points will seemingly be mitigated. That will not occur for a while and excessive vitality costs would possibly stick with us. Though the price of home vitality is regulated in most elements of the world, this has led to many vitality provide firms going broke.

These vitality firms are pressured to purchase wholesale energy at excessive costs and promote it at mandated decrease costs to retail customers. With out giant authorities subsidies, this isn’t sustainable. Ultimately, customers will face greater costs. Except one thing drastic modifications, these inflation pressures are coming down the pipe, however the timing of once they floor is just not but identified.

If excessive vitality costs stick with us for the lengthy haul, the implications are two-fold for the Australian Greenback. Firstly, as an vitality exporting nation, it will seemingly result in a greater backside line on the commerce steadiness and consequent shopping for of AUD.

Secondly, excessive inflation could be stickier than central banks are anticipating. It may result in a financial coverage tightening race, driving up charges. How rapidly the RBA responds could decide yields throughout the curve, and this will play a task within the attractiveness or in any other case of the Australian Greenback.


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— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the feedback part beneath or @DanMcCathyFX on Twitter


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