Q3 CPI to provide key clues for the RBA

The RBA have emphasized the importance of the Australian Q3 CPI in recent communications and a weak number (below 0.2% qoq on the core inflation read) could see the implied probability of a rate cut increase from 18% to 40-50%.

Source: Bloomberg

Most economists actually expect inflation in Australia to have bottomed and could head higher into the RBA’s projections of 2% into late 2017.

So a quarterly print at or below 0.2% should send AUD/USD into the September lows of $0.7442, while a number at 0.6% or above should solidify the view that the RBA may hold for some time to come.

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