AUD/USD yawns as CPI higher than expected
|The Australian dollar is showing limited movement on Wednesday. AUD/USD is trading at 0.6647 in the European session, down 0.02% on the day at the time of writing.
What will it take to shake up the Australian dollar? Australian retail sales were weaker than expected on Tuesday and today’s inflation report was higher than anticipated, but neither release had much impact on the sleepy Australian dollar, which has been drifting since Monday.
Australia’s inflation rate creeps up to 3.6%
Australia’s CPI rose by 3.6% y/y in April, up from 3.5% in March and higher than the market estimate of 3.4%. This was the highest reading since last November and was driven by higher food prices and clothing. Core CPI, which excludes food and energy, remained unchanged at 4.1%.
This marks the second straight month that CPI accelerated and beat the estimate and that could give the Reserve Bank of Australia reason to delay rate cuts. The RBA, like other major central banks, has slashed inflation but is having a difficult time in the “final stretch” as the target range of 2-3% remains elusive.
The RBA has held the cash rate at 4.35% for four straight times and we’re likely to see another hold at the June 18th meeting. RBA policy makers will be disappointed with today’s inflation report but that is unlikely to lead to a rate hike. Consumers and businesses are struggling with elevated rates and the high cost of living and the central bank will be reluctant to raise rates further.
Still, inflation remains priority number one and if upcoming CPI releases show inflation continuing to move higher, the RBA will have to consider raising rates to rein in stubborn inflation.
AUD/USD technical
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AUD/USD is testing support at 0.6643. Below, there is support at 0.6578.
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0.6695 and 0.6760 are the next resistance lines.
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