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Given how high expectations were, it seems economists had gotten well ahead of themselves and forgotten the harsh reality that the Australian economy is struggling. Headline CPI came in at 2.9% on-year as opposed to the forecast 3.2%. The trimmed mean, which the RBA actually looks at, came in flat at 2.6% while the market was expecting a 2.9% rise. This really quashed any talk of an RBA hike and saw a sharp reversal in the AUD.
This will be much welcome relief for the RBA and analysts feel this it see the central bank reinforce its neutral bias next month. AUD/USD was actually drifting higher earlier in the session, printing a high of 0.938. As soon as the data hit the slide took the pair down to 0.932.
Shortly after the CPI, China released its HSBC flash manufacturing PMI reading which came in at a slightly worse than expected 48.3. While the figure showed the slide which has been happening since October last year has finally been arrested, there are still clear signs of weakness. We already know Chinese officials are quite comfortable with growth of around 7.5%, so the probability for any aggressive stimulus is low.
Uptrend channel in place
AUD/USD has been finding support in the 0.93 region and this level managed to briefly hold today. However, this wasn’t for long and the pair is now deep in the red at 0.928. AUD/USD has been in an ascending channel on the daily chart since February and the bottom-end of this channel might lend some support. There is also a support line coming in at 0.926, so perhaps we might find some stability there. The rest of the week is very quiet on the economic front and therefore focus switches to the USD side of the equation.