The Australian dollar is under pressure in today’s trading session after another poor round of disappointing inflation numbers cast doubt on a rate hike expected by the RBA in the coming months.
Quarterly CPI figures hit the market today at 0.4 percent against analysts’ expectations for a figure of 0.5 percent while the grossed up yearly figure came in at 1.8 percent against a consensus of 1.9 percent.
The figures still remain below the RBA’s target rate of between 2 and 3 percent and creates headache for the central bank as their ability to lift interest rates to cool down the housing market, among other things is in jeopardy.
“The latest inflation report should put to bed any consideration of a near-term interest rate hike by the Reserve Bank. Despite an increase in the tobacco excise and higher fuel and utility prices, annual inflation once again failed to reach the bottom end of the RBA’s inflation target.” Said Callam Pickering, APAC Economist for global job site Indeed.
“We haven’t yet seen any improvement in wage growth and until that materializes inflation will continue its disappointing run. Given the persistent weakness in wage growth we’d prefer to see some evidence of improvement before the RBA considers hiking interest rates.” He added.
The Australian dollar has gained over 5 percent since the start of the year against its US counterpart which many attribute to weakness in the US dollar rather than strength in the local currency.
With interest rates now expected on hold for the rest of the year and commodity prices falling, many see the current level of the Aussie dollar as temporary.
“The move up toward 80 cents has largely been driven by U.S. dollar weakness rather than Aussie dollar strength,” said Simon Doyle, Sydney-based head of fixed income and multi-asset at Schroder.
“We don’t see that as being something which is sustainable.” He added.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this broker. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this broker. Before deciding to trade foreign exchange you should consider whether you understand how CFDs work, your investment objectives, your level of experience and readiness of taking risk. The possibility exists that you could sustain a loss of some or of all of your initial investments and therefore you should not risk more than you are prepared to lose. Please seek independent financial advice if necessary.
|By clicking "Continue" you will be redirected to the website operated by FIBO Group, LTD company registered in BVI and regulated by FSC. Please familiarize yourself with the Customer Agreement through the link. Click "Cancel" to remain on this page.|