Australian inflation figures are A-OK in Q1. Prices rose by 0.2% q/q and 1.3%, as expected. When stripping out more volatile components such as oil and food, the Trimmed Mean CPI rose 0.6% q/q and 2.3%. The latter figure is a tick above 2.2% expected.
This was enough to relive AUD/NZD from the danger of parity and to help AUD/USD advance and get closer to 0.78.
Also the Weighted Median inflation figure came out better than expected, with +0.6% q/q and 2.4% y/y. All in all, the numbers were either “as expected” or a tick above expectations.
Nevertheless, this was enough for the A$ to recover. Traders seem to have faded away the bearish comments from RBA governor Stevens that were later followed by the heavy hints about cutting the rates in May.
The Reserve Bank of Australia would like a weaker exchange rate for the Aussie, but if inflation is as solid as it is and as house prices are still looking OK, markets aren’t convinced that a cut is indeed on the cards.
Here is how this recovery looks on the chart:
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