When is the Aussie CPI data and how could it affect AUD/USD?

Early Wednesday in Asia, the Australian Bureau of Statistics (ABS) will roll out the first quarter (Q1) inflation numbers for Australia. The releases will include the headline Consumer Price Index (CPI) the Reserve Bank of Australia’s (RBA) Trimmed Mean CPI.

With the RBA’s latest negative intent on the inflation figures for the second quarter, considering the coronavirus (COVID-19) outbreak, the Q1 data becomes important if it reinforces the central bank’s outlook.

That said, the CPI is likely declining from 0.7% prior to 0.2% on the QoQ basis while expected to rise to 2.0% from 1.8% previous readouts on the YoY format. Further, RBA Trimmed Mean CPI could remain static at 0.4% quarterly and 1.6% on YoY, as per the forecasts.

TD Securities seems to consider today’s data as a non-event as their analysts said:

The Q1 CPI release has lost its significance in light of the efforts to overcome the virus. Nonetheless, the Q1 print should confirm the rather subdued outlook for inflation pre virus. On headline, we are at 0% q/q but base effects drive the annual rate to 1.8%. For trimmed expect a 0.3% q/q gain to drive annual trimmed to 1.6%.

On the other hand, Westpac said:                                                                                                

Westpac forecasts headline inflation of 0.1%qtr, 1.9%yr, with falls in holiday travel (impacted by the bushfires and virus disruptions) and petrol prices. The Q1 trimmed-mean CPI is forecast to be a subdued 0.3%qtr, 1.6%yr. This is consistent with weak wages growth, patchy consumer spending and softness in housing inflation. The RBA has flagged that headline inflation could tumble to a negative rate in Q2, on petrol prices and policy-driven price reductions such as on childcare.

How could it affect AUD/USD?

Considering the global central banks’ plethora of efforts to combat the coronavirus, including the RBA, the first quarter (Q1) inflation figures are less likely to offer any further signals of additional easing by the Aussie central bank. However, the downbeat outcome may join the RBA’s forecasts of disappointing price pressures for Q2 readings and can challenge the AUD/USD pair’s latest upside.

Technically, Unless slipping below the mid-month top surrounding 0.6440, AUD/USD can keep targeting 100-day SMA, near 0.6575 during the further upside. In a case where the quote drops below 0.6440, a three-week-old rising support line near 0.6350 can lure the sellers.

Key Notes

AUD/USD slips below 0.6500, but still near seven-week top, ahead of Aussie CPI

AUD/USD Forecast: Bulls insists ahead of Australian inflation

Australian RBA's Quarterly Inflation Preview: Does it really matter?

About the Australia Consumer Price Index (CPI)

The Consumer Price Index released by the RBA and republished by the Australian Bureau of Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of AUD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. A high reading is seen as positive (or bullish) for the AUD, while a low reading is seen as negative (or Bearish).

About the Australia RBA Trimmed Mean CPI

The Consumer Price Index released by the RBA and republished by the Australian Bureau of Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The trimmed mean is calculated as the weighted mean of the central 70% of the quarterly price change distribution of all CPI components, with the annual rates based on compounded quarterly calculations.