AUD Weakens After Australian CPI Falls Below Forecasts
The AUD/USD weakened in early Asian trading on Wednesday after Australian inflation data fell faster than expected. The ABS reported April CPI rose 4.2% YoY (below the consensus of 4.4%), down from the previous 4.6%, while the monthly CPI slowed to 0.4% from 1.1%. The RBA's core inflation measure (trimmed mean) was recorded at 0.3% MoM and 3.4% YoY, indicating that underlying price pressures have not completely dissipated.
The market interpreted this data as a signal of headline disinflation, giving the RBA some short-term breathing room, but not enough to remove the focus on core inflation. The primary channel is through policy expectations: lower inflation typically reduces the need for further tightening and reduces the attractiveness of the AUD, especially when global risk appetite is unstable.
On the external front, AUD weakness is likely to be contained as the US dollar no longer enjoys strong safe-haven support, but Middle East headlines continue to keep the market cautious. Iran condemned the US attack on Hormuzgan as a violation of the ceasefire, while Washington called it a defensive operation. The IRGC also claimed to have targeted US air assets and asserted the right to retaliate in the event of any violation, so uncertainty surrounding Hormuz remains a source of volatility in sentiment and energy.
Source: Newsmaker.id
