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- AUD/USD: Further near-term setback for the Aussie as markets continue to weigh up inflation risks – MUFG
AUD/USD: Further near-term setback for the Aussie as markets continue to weigh up inflation risks – MUFG
AUD/USD has fallen back towards support at the 0.6600 level after the release of the Australian CPI report for May. Economists at MUFG Bank discuss the Aussie outlook.
Weaker CPI report hits Aussie but underlying details are less favourable
Headline inflation slowed more than expected by 1.2ppts to an annual rate of 5.6% as it continued to move further below the peak from the end of last year at 8.4%.
While the RBA will be pleased by the bigger drop in the headline rate, the underlying details of the report were not as favourable. Core inflation measures have peaked but they remain too high. The trimmed mean measure of core inflation slowed by 0.6ppt to an annual rate of 6.1% as it moved further below the peak from December at 7.2%.
We still expect the RBA to raise rates further although it could now choose to skip next week’s policy meeting and leave rates on hold until the following meeting in August.
Overall, it is a further near-term setback for the Australian Dollar which has been correcting lower since the middle of the month.
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