AUD/USD climbs firmly to near 0.6400 on higher-than-projected Australian CPI at 7.3%

• AUD/USD has advanced to 0.6400 as Aussie headline CPI has landed at 7.3% vs. projections of 7.0%.
• The RBA would require returning to its 50 bps rate hike spell in absence of inflation exhaustion signals.
• A rebound in the risk-off impulse has pushed the DXY above 111.00.

The AUD/USD pair has jumped to 0.6400 as the Australian Bureau of Statistics has reported the headline Consumer Price Index (CPI) for the third quarter of CY2022 at 7.3%, higher than the expectations of 7.0% and the prior release of 6.1% on an annual basis. Also, the quarterly inflation rate has landed in line with the former print of 1.8% and higher than the projections of 1.5%.

This may force the Reserve Bank of Australia (RBA) to announce a bigger rate hike in the upcoming monetary policy.  It is worth noting that the RBA hiked the Official Cash Rate (OCR) by 25 basis points (bps) to 2.6% in its October monetary policy meeting. RBA Governor Philip Lowe slowed down the pace of hiking rates in October as the central bank was banking upon a 50 bps rate hike spell earlier. Now, a bigger-than-projected rate hike will compel the RBA to return to a 50 bps rate hike spell

On Tuesday, the aussie bulls displayed a steep rise and defended China’s Jinping-infused pessimism. The unprecedented third term for China’s XI Jinping leadership dented the sentiment of investors favoring Chinese equities and other related assets. The antipodean was punished for being a leading trading partner of China, as Jinping’s ideology-driven approaches are not healthy for China’s economic prospects.

Meanwhile, the US dollar index (DXY) is displaying a pullback move and has crossed the 111.00 hurdle. The risk-on profile has witnessed a dent as S&P500 futures have witnessed a vertical fall after a three-day buying spree. This could be a correction in the 500-stock basket of the US after a firmer rally.