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The official data published by the Australian Bureau of Statistics (ABS) showed on Wednesday that Australia’s monthly Consumer Price Index (CPI) rose 5.2% in the year to August 2023, compared with the annual increase of 4.9% seen in July.

The market forecast was for a 5.2% increase in the reported period.

“The most significant price rises were Housing (+6.6%), Transport (+7.4%), Food and non-alcoholic beverages (+4.4%) and Insurance and financial services (+8.8%),” the ABS said.

AUD/USD reaction to the monthly Consumer Price Index data

The AUD/USD recovery mode remained intact on hot Australian inflation data, which keeps expectations alive for more rate hikes by the Reserve Bank of Australia (RBA). The pair is adding 0.15% on the day to trade at 0.6405, at the press time.

15-minutes chart

Australian Dollar price today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the US Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.01% -0.05% -0.11% -0.22% -0.05% -0.12% 0.00%
EUR -0.02%   -0.07% -0.13% -0.20% -0.06% -0.13% -0.01%
GBP 0.05% 0.07%   -0.06% -0.13% 0.02% -0.06% 0.06%
CAD 0.11% 0.13% 0.06%   -0.07% 0.08% 0.00% 0.13%
AUD 0.20% 0.20% 0.12% 0.07%   0.14% 0.07% 0.20%
JPY 0.04% 0.06% -0.01% -0.06% -0.10%   -0.08% 0.05%
NZD 0.12% 0.13% 0.06% 0.01% -0.09% 0.07%   0.12%
CHF -0.01% 0.01% -0.06% -0.12% -0.18% -0.05% -0.12%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).


This section below was published at 22:30 GMT as a preview of the Australian inflation data.

  • The Australian Monthly Consumer Price Index is forecast to rise 5.2% YoY in August, up from the 4.9% increase recorded in July.
  • CPI inflation is expected to show its first reacceleration since April.
  • Soaring petrol prices in Australia are likely to push inflation higher.

The Australian Monthly Consumer Price Index (CPI) inflation data for August will be published by the Australian Bureau of Statistics (ABS) on Wednesday at 01:30 GMT. The data could be critical for the Australian Dollar (AUD) and the Reserve Bank of Australia (RBA), which will hold its October monetary policy meeting next week. 

Inflation in Australia (AU) peaked in December 2022, when the Monthly CPI showed an 8.4% year-on-year increase. Since then, it has been trending lower, with only a rebound observed in April. Last month, the inflation number surprised with a lower-than-expected reading, reinforcing the expectation that the RBA would maintain interest rates unchanged in September as it did. Another soft reading looks unlikely in August as petrol prices have risen considerably, leading experts to anticipate a potential reacceleration in inflation.

What to expect from Australia’s August inflation rate?

A rebound in the inflation rate in Australia in August could increase the expectation of another rate hike from the RBA, although not necessarily at the upcoming meeting next week. The quarterly Consumer Price Index remains the most important measure of household inflation. Since the monthly data is derived from the available data from the quarterly CPI, a rebound in August is likely to anticipate a hotter Q3 CPI reading, which will be released on October 25.

The market does not favor a rate hike at the October 3 meeting, which will be Michele Bullock’s first meeting as a Governor. The expectation for a rate hike increases for the November and December meetings. According to Bloomberg’s World Interest Rate Probability (WIRP), the odds of another rate hike rise to 85% for the first quarter of next year. Interest rate futures indicate that the market expects the cash rate to peak around 4.55% in the first quarter of 2024, higher than the current 4.10%.

An analyst at TD Securities explained that a significant upside surprise in the monthly CPI “adds scrutiny to the Q3 CPI printout in late October. “We can’t discount the odds of an insurance hike in November, especially given the risk of an inflation resurgence after the march higher in commodity and energy prices.”

If the Consumer Price Index shows inflation not slowing down and, on the contrary, accelerating further above the 2%-3% target range, the Australian Dollar could receive a boost as markets would consider further tightening ahead. However, if the Monthly CPI comes in below expectations, it could hurt the Australian Dollar, but it will be positive news for the Australian economy.

When will the Monthly Consumer Price Index report be released, and how could it affect AUD/USD?

The Monthly Consumer Price Index inflation data for August is scheduled to be published at 01:30 GMT on Wednesday. Since August, the AUD/USD pair has been trading within a range between 0.6500 and 0.6350, reaching the lowest levels of the year. The pair’s decline can be attributed not only to a weaker Australian Dollar but mainly to a stronger US Dollar driven by higher Treasury yields and the strong performance of the US economy. The CPI figures could have a limited impact on the pair, particularly if they come in line with expectations. A significant surprise in the data may be required for the AUD/USD to approach the limits of the current range or even break out of it.

Expectations of another rate hike from the RBA could potentially boost the AUD/USD pair in the near term. However, it is unclear how long-lasting the impact would be. The combination of higher inflation and monetary tightening at a time when the economy is facing challenges may limit the upside potential for the Australian Dollar and could ultimately have a negative impact.

The AUD/USD pair is following a bearish trend, finding support around the 0.6350 area, while the rebound has been limited around the 0.6500 area. The future direction of the pair largely depends on a consolidation outside of these two levels. A convincing break above 0.6500 could open the doors to a more sustainable appreciation, but it would likely require improvements in economic data and a positive outlook for China.

On the contrary, negative market sentiment and a worsening economic outlook could continue to put pressure on the pair around 0.6350, and a break below this level could lead to a downward acceleration, targeting 0.6300. The next medium-term support level stands at the 0.6260 zone.

Australian Dollar price this week

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this week. Australian Dollar was the weakest against the US Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.83% 0.80% 0.32% 0.76% 0.42% 0.19% 0.99%
EUR -0.83%   -0.02% -0.50% -0.05% -0.41% -0.60% 0.17%
GBP -0.81% 0.03%   -0.47% -0.02% -0.38% -0.62% 0.19%
CAD -0.33% 0.51% 0.47%   0.49% 0.09% -0.14% 0.67%
AUD -0.79% 0.03% -0.01% -0.48%   -0.39% -0.63% 0.19%
JPY -0.43% 0.43% 0.39% -0.10% 0.36%   -0.23% 0.58%
NZD -0.21% 0.64% 0.62% 0.14% 0.59% 0.23%   0.82%
CHF -1.02% -0.18% -0.20% -0.68% -0.22% -0.58% -0.82%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Inflation FAQs

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

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