AUD/USD Forecast: Australia’s Inflation Eases To 8-Month Low

• The consumer price index (CPI) for Australia increased by 6.8% in the year to February.

• Investors responded by lowering the odds of a 25bps RBA hike. 

• Retail sales stabilized in February, indicating consumers are cutting back on purchases.

Today’s AUD/USD forecast is bearish. Australian inflation eased to an eight-month low in February. This was partly due to a sharp drop in vacation travel and lodging costs. It bolsters the case for delaying interest rate increases next month.

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The consumer price index (CPI) for Australia increased by 6.8% in the year to February, according to data from the Australian Bureau of Statistics. This is the slowest increase since June of last year. It contrasted with 7.4% the month before and the 7.1% market expectations.

Investors responded by driving the local currency down 0.2% to $0.6694. They also lowered the odds of a 25-basis point increase from the Reserve Bank of Australia at its next policy meeting to 5% from 15%. 

They had almost completely discounted the possibility of another increase in the cash rate following concerns about the turmoil in the world’s banking industry.

According to data, retail sales stabilized in February, indicating consumers are cutting back on purchases in response to increasing living expenses and interest rates.

According to ANZ analysts, the RBA will still likely raise interest rates in April. They base this expectation on recent data releases that show a robust labor force, resilient business conditions, and healthy consumer spending on services.

According to RBA Governor Philip Lowe, the bank is getting closer to stopping rate increases since monetary policy is currently restrictive. Depending on the data, a suspension might occur as early as April.

AUD/USD key events today

Investors will pay attention to the pending home sales data from the US, which will show the housing market’s current state.

AUD/USD technical forecast: Bulls losing control at the 30-SMA

The 4-hour chart shows AUD/USD trading near the 30-SMA, with the RSI at the pivotal 50-level. The price is at a level where either bears or bulls can take over. Bears are currently challenging the previous bullish move that saw the price go above the SMA.

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Bulls were rejected above the 0.6700 key level. The price will likely fall to the next support at 0.6625 if it stays below the 30-SMA.

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