Australian Dollar Swoons as Soft CPI Boosts RBA Rate Cut Bets
- Australia’s benchmark inflation rate hit 1-year low in the first quarter
- Year-on-year CPI growth rate 1.3% vs. 1.7% expected by economists
- Aussie Dollar fell with bond yields, implying rising RBA rate cut bets
The Australian Dollar swooned after first-quarter CPI data disappointed economists’ expectations (as expected), fueling RBA rate cut speculation. The headline year-on-year inflation rate registered at a one-year low of 1.3 percent, falling short of bets calling for a print at 1.7 percent.
The Aussie fell alongside front-end bond yields, suggesting the release was interpreted as raising the probability of RBA stimulus expansion on the horizon. The priced-in probability of a 25bps rate cut at next week’s policy meeting has jumped to 49 percent from just 15 percent ahead of the CPI announcement.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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