AUD/USD extends post-Aussie CPI losses, hits six-week lows

• AUD/USD has slipped to six-week lows near 0.7030 in response to the weaker-than-expected Aussie CPI release.
• The AU-US 10-year bond yield spread has hit a fresh multi-decade low in the AUD-negative manner.

AUD/USD fell to 0.7031 soon before press time, the lowest level since March 11, extending the 40-pip drop seen immediately after the Aussie CPI release at 01:30 GMT.

The cost of living in Australia, as represented by the consumer price index, cooled to 0.3 percent in the first three months (Q1) of 2019, following a 0.4 percent rise in the final three months of 2018. The markets were expecting a quarter-on-quarter rise of 0.4 percent in the first quarter.

The RBA’s mean or core inflation also cooled to 1.6 percent in Q1, having risen by 1.8 percent year-on-year in the fourth quarter of the last year.

With the below-forecast inflation figure, the spread between the Aussie and US 10-year government bond yields have dropped to -0.76 basis points – the lowest level since October 1981.

As a result, the sell-off in the Aussie dollar looks to have legs, meaning the psychological support of 0.70 could come into play in the next 24 hours.

Pivot points