Talking Points:
- Australian Dollar little-changed after lower-than-expected Chinese CPI data
- China’s headline year-on-year inflation rate down to 1.6% in September
- Lack of Aussie response may reflect building RBA interest rate cut speculation
The Australian Dollar showed a tepid reaction as lower-than-expected Chinese inflation data crossed the wires. The consumer price index (CPI) showed a 1.6 percent year-on-year increase in September as opposed to the 1.8 percent gain expected by economists. Chinese producer price index (PPI) figures were released alongside the CPI data set. Wholesale inflation registered at 5.9 percent year-on-year as expected, unchanged from the prior month.
The Aussie’s lackluster response may reflect the markets’ focus on building RBA rate cut speculation after Westpac Banking Corp announced it would raise mortgage rates by 20 basis points to help offset an increase in capital requirements. Traders speculated that other Australian lenders would follow suit, pushing the RBA to counter the increase in borrowing costs with further easing. Indeed, the currency was trending lower alongside Australian bond yields well before Chinese CPI data crossed the wires.
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