Australian Dollar Falls Sharply on Disappointing CPI
Created Using Marketscope 2.0
THE TAKEAWAY: The Australian Dollar fell on news that the Australian year on year Consumer Price Index came in lower than expected at 2.5 per cent versus an expected 2.8 per cent.
April has seen the release of important economic indicators for both Australia, and its largest trading partner, China. Earlier in the month, Australia saw unemployment jump from 5.4 per cent in February to 5.6 per cent in March with a decline in participation. Later this month, China released GDP data, which had growth come in less than expected, and on Tuesday of this week, China released a Manufacturing PMI of 50.5 versus an expected value of 51.5. This has placed downward pressure on the Australian Dollar since the start of April as soft economic data from the region added weight to speculation that the Reserve Bank of Australia may cut rates at their next meeting.
The Consumer Price Index describes the changes in price of a basket of goods and services, and Central Banks use this value alongside other indicators in deciding monetary policy. The previous Australian CPI for the 4th quarter of last year was 2.2 per cent, and economists were expecting 2.8 per cent. The eventual release of 2.5 per cent although an improvement on last quarter, was not enough to change the minds of investors pricing in more RBA easing. The currency fell from above 1.0270 to just above 1.0240 on the news.