Late tonight (or early tomorrow morning, depending on your perspective) Australia will release its Q3 inflation figures. This will be the prelude to next week's meeting of the Reserve Bank of Australia (RBA). And what the markets will see tomorrow is likely to please the central bankers, Commerzbank’s FX analyst Volkmar Baur notes.

Lower inflation can lead to AUD weakness in the short term

“The majority of analysts expect an annual inflation rate of 2.9% in the third quarter. In my view, however, the risk is more to the downside. For the month of September, the rate could even be around 2.3%. While the quarterly rate has probably returned to the target range of 2-3%, the monthly rate is therefore likely to have ended up even below the implicit target of 2.5%.”

“But while all of this is likely to please central bankers, it is unlikely to persuade them to cut rates next week. Although the lower inflation rate meets one of the conditions for a rate cut, the Reserve Bank of Australia still sees the risk to inflation as being on the upside, with the labour market still very strong and wage growth still too high.”

“For the Australian dollar, this means that lower inflation, especially if it surprises to the downside, could lead to weakness in the short term. In this case, the market would certainly consider the possibility of an earlier RBA rate cut. However, the weakness is likely to be short-lived as I do not expect the RBA to cut rates next week.”

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD flat lines around the 0.6565 area after Australian Retail Sales

AUD/USD flat lines around the 0.6565 area after Australian Retail Sales

AUD/USD moves little following the release of softer Australian Retail Sales figures and languishes near its lowest level since August 8 touched on Wednesday. A slight deterioration in the global risk sentiment, along with the underlying bullish sentiment surrounding the USD, offsets hawkish RBA expectations and acts as a headwind for the Aussie. 

AUD/USD News
USD/JPY extends the range play below multi-month top ahead of BoJ

USD/JPY extends the range play below multi-month top ahead of BoJ

USD/JPY remains below a three-month high touched earlier this week as traders seem reluctant ahead of the crucial BoJ policy decision later this Thursday. The cautious market mood underpins the safe-haven JPY, which seemed unaffected by mixed Japanese economic data and exerts some pressure on the pair amid subdued USD price action.

USD/JPY News
Gold price remains close to record high amid US election jitters, geopolitical risks

Gold price remains close to record high amid US election jitters, geopolitical risks

Gold price edges lower during the Asian session on Thursday amid a further rise in the US Treasury bond yields. Any meaningful corrective decline still seems elusive in the wake of the US political uncertainty and Middle East tensions, which might continue to benefit the safe-haven precious metal.

Gold News
Bank of Japan set to hold interest rates steady as rising inflation points to year-end hike

Bank of Japan set to hold interest rates steady as rising inflation points to year-end hike

The Bank of Japan is widely expected to maintain its short-term interest rate at around 0.25%, following the conclusion of its two-day monetary policy review on Thursday. The BoJ decision will be accompanied by the bank’s quarterly outlook report, which will be released at around 3:00 GMT.

Read more
German economy surprises in the third quarter

German economy surprises in the third quarter

The German economy avoided a technical recession in the third quarter, showing unexpected growth. However, this does not change the fact that the economy remains stuck in stagnation.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures