Australia’s inflation came in faster than expected in the first three months of 2024, suggesting price pressures are proving stickier and bolstering the case for the Reserve Bank of Australia to hold interest rates at a 12-year high.
The core inflation gauge — the trimmed mean — rose 4%, also higher than forecast and well above the RBA’s 2-3% target.
The CPI report also showed:
On a quarterly basis, the most significant contributors were education, up 5.9%, health, 2.8% higher and housing up 0.7%.
Rents continued to increase at the fastest rate in 15 years.
Meat and seafood prices fell this quarter as increased supply and discounting led to price drops for beef, veal and lamb.
Annual non-tradables prices, which includes goods and services that are mostly influenced by domestic factors, eased to 5% from 5.4%.
Annual tradables were significantly lower at 0.9%, compared with 1.5% in the fourth quarter of last year. Deflation there has been seen in imported goods including footwear, clothing accessories, furniture and appliances.
Money markets wound back pricing for RBA easing this year, with three-year yields rising as much as 18 basis points to 4.03%. Swaps traders see almost no prospect of a rate cut in December versus about a 70% chance prior to the report.
RBA policymakers have expressed concern about the stickiness of services prices in Australia and the potential for inflation expectations to become unmoored the longer CPI remains elevated. The Australian figures followed the US data this month showing stronger price pressures and spurring concerns that inflation is becoming entrenched.
After the AUDCAD pair strengthened sharply, driven by expectations of a continued tight monetary policy in Australia, the pair was in the technical overbought zone, indicating the probability of a downward correction. The possible target of the AUDCAD correction is the level of 0.8880.
The final recommendation is to sell AUDCAD.
The profit could be fixed at 0.8880. The Stop-loss could be placed at 0.8930.
It’s suggested to limit the trading volume to no more than 2% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
