- AUD/USD is down almost 1%
- Australian CPI expected to drop to 6.6%
- UoM Consumer Sentiment falls, US New Home Sales jump
The Australian dollar has plunged on Tuesday. AUD/USD is trading at 0.6632, down 0.95% on the day. The Aussie is under strong downward pressure, having lost around 1.7% since Thursday.
Australian inflation expected to fall
Australia releases inflation on a quarterly basis, which magnifies the impact of the release. Inflation has been falling and this trend is expected to continue in the Wednesday release of first-quarter CPI. The headline figure is expected to fall from 7.8% to 6.9% y/y and from 1.9% to 1.3% q/q. The core rate, which is considered a more reliable gauge, is likewise expected to fall – from 6.9% to 6.7% y/y and from 1.7% to 1.4% q/q.
Investors will be mindful that headline inflation surprised on the upside in Q4, rising from 7.3% to 7.8%. The two monthly inflation reports since the Q4 release in January, however, indicated that inflation was back on its way down, with headline CPI falling from 7.4% to 6.8% and beating expectations.
The RBA would love to pause rates at 3.60% for a second straight month, and another drop in inflation would strongly support a pause at the May 2nd meeting. As well, another deceleration would be a strong indication that inflation has peaked, although the battle is far from over as it will take a long time to achieve the 2% target. The likelihood of another pause in rates stands at 83%, according to the RBA Rate Tracker.
In the US, today’s data has been a mixed bag. UoM Consumer Sentiment for April was expected to remain unchanged at 104.0, but surprised on the downside, falling to 101.3. There was better news from New Home Sales, which soared 9.6% in March, rebounding from -3.9% in February and crushing the estimate of 1.1%.
- There is resistance at 0.6751 and 0.6808
- AUD/USD is testing support at 0.6657. Next, there is support at 0.6572