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I know we’ve got a couple of major central bank announcements scheduled this week, but Australia’s quarterly CPI release could still steal the forex show on Wednesday. Here are some reasons why you should watch out for this top-tier report:

1. The RBA is watching inflation very closely

During their monetary policy statement earlier this month, RBA officials mentioned that they are keeping close tabs on price levels, citing that further information should help them refine their assessment for growth and inflation before deciding whether any adjustments are warranted or not. This reflects a slight shift in stance from their June policy statement wherein no mention of potential adjustments were made.

Also, keep in mind that the downbeat Q1 CPI figure was one of the main reasons for the RBA’s decision to slash rates from 2.00% to 1.75% back in May. Price levels dropped 0.2% in the first three months of 2016 instead of rising by the projected 0.3% figure, bringing Australia’s annual CPI to a record low of 1.5% for the period. With that, another downbeat CPI reading for the second quarter of the year could reinforce RBA rate cut expectations.

2. RBA jawboning and accommodative policy

In the minutes of their July meeting, RBA Governor Stevens and his gang of policymakers noted that an appreciating Australian dollar could complicate the economic transitions taking place. While most of their discussions focused on its negative impact on export activity, RBA officials also touched upon the drag on local consumption, which could be partly spurred by weaker domestic price pressures from a stronger Aussies.

Apart from that, the RBA emphasized its preference to keep monetary policy accommodative, saying that it would “make any adjustment to the stance of policy that may be appropriate” depending on “further information on inflationary pressures, the labour market and housing market activity.”

3. Rebound in price levels expected

On a less downbeat note, market analysts are expecting to see a 0.4% rebound in CPI for the second quarter of the year. If the actual results meet or beat expectations, traders could price in weaker odds of an RBA interest rate cut in their policy decision next week.

Other inflation indicators such as the quarterly PPI and import prices are set to be printed after the release of the CPI so there aren’t much clues to pick up on, although it could be worth noting that the RBA index for commodity prices fell 0.4% in June due mostly to weaker iron ore prices. Prior to that, the index was up 0.4% in May and 1.6% in April.

In any case, be on the lookout for any significant surprises which could set the tone for Aussie price action for the rest of the week. If you’ve got any open AUD positions then, stay on your toes during the actual release on July 27, 1:30 am GMT. Good luck!

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