The Australian dollar fell after inflation as measured by the Consumer Price Index came in well below market expectations, and speculation has risen that the Reserve Bank of Australia (RBA) will be forced to cut rates in coming months. That could mean an end to the recent rally in the Aussie dollar.
Australian CPI in the first quarter came in at 1.3%, well below the 1.7% year-on-year increase the market was expecting and the 2% increase predicted by the monthly TD-MI CPI gauge. The Aussie dollar promptly declined 1.5% when the figure was released. Key core inflation measures were even more worrying, with the Trimmed Mean CPI and Weighted Median CPI declining to their weakest levels on record.
The bond market is now pricing in a more than 53% chance that the RBA will cut rates at its meeting on 2 May, and a rate cut by September has now been fully priced in.