Perhaps the most notable release has been Australia’s Q3 CPI data, which remained broadly consistent with the RBA’s target band. The headline figures were bang in line with expectations but the trimmed mean figures fell slightly short.
Headline CPI showed growth slightly ahead at 0.5% quarter-on-quarter and 2.3% year-on-year. The trimmed figures missed estimates. CPI was up 0.4% quarter-on-quarter (vs 0.5% expected) and 2.5% year-on-year (vs 2.7% expected). While the initial reaction in the local currency was negative, it wasn’t long before investors realised the minimal impact this would have on policy and decided to focus on global macro factors instead.
Consolidation likely in the near term
AUD/USD initially dipped to $0.875 but it didn’t take long for traders to step back in and buy the currency pair on weakness. Following yesterday’s not-so-bad China GDP reading, commodities and other risk assets have been in a fairly strong position, and this also seems to be benefitting the AUD.
In the near term, I’m actually eyeing a squeeze higher into the $0.8800 region. I feel the pair is prime for some consolidation until we see the next major catalyst for global markets. Upside is likely to be capped around $0.8933 – the point where the 38.2% retracement of the sharp drop through September comes in.