Surge in AU inflation heightens RBA rate hike expectations but is not a game changer for the AUDUSD

This morning's release of March quarter Australian inflation data smashed already elevated expectations. The stunning beat firms up the chances that the RBA will raise interest rates at its monthly board meeting next week for the first time since 2010.

Headline CPI rose by 2.1% QoQ and 5.1% YoY, shattering the median consensus for a rise of 1.7%qoq or 4.6%yoy. The RBA's preferred measure of inflation, the trimmed mean, increased by 1.4% QoQ and 3.7% YoY, well above the market's expectations of 1.2%qoq and 3.4%yoy.

Core inflation is now 70bp above the RBA's 2-3% target band, and the quarterly gain is the strongest movement since the series began in 2002. The annual trimmed mean was the highest since 2009.

The stunning beat increases the chances that the RBA will raise interest rates by 15bp at its monthly board meeting next week for the first time since 2010, just three weeks before a Federal Election.

The RBA last lifted rates during an election campaign in 2007, and the incumbent Howard government promptly lost the election three weeks later.

While the acceleration was broad-based, the most notable rises were across food (a result of recent floods in Northern NSW and Southern QLD), transport, housing and fuel.

After the release, the AUDUSD bounced from .7150 to a high near .7170 before sliding back to .7150. This is because the driver of the AUDUSD in recent sessions has been the rapid depreciation of the CNY.

The Chinese currency has fallen almost 3.5% over the past seven days on growth concerns emanating from China as the lockdown in Shanghai enters the fourth week and looks set to spread to Beijing.

USDCNY had a more sedate date yesterday, settling around 6.55 after the PBoC's FX RRR cut by 1%, viewed as an effort to slow down the depreciation rather than draw a line in the sand.

USDCNY is expected to continue higher towards 6.65 in the coming weeks. This should see the AUDUSD test support between .7050 and .6950, providing a medium-term buying opportunity for the AUDUSD.

SourceTradingview.ThefiguresstatedareasofApril 27th2022.Pastperformanceisnotareliableindicatoroffutureperformance.Thisreportdoesnotcontain and is not to be taken as containing any financial product advice or financial product recommendation

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.