8:27 AM · 26 July 2023

Chart of the day - AUDUSD (26.07.2023)

AUD/USD
Forex
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  • Lower CPI data weakens the Australian dollar
  • Goldman Sachs predicts a lower target rate for the RBA
  • AUDUSD react to the key level at 0.679

Australian inflation slowed more than expected in the second quarter due to a decline in domestic holiday and gasoline costs, suggesting less pressure for another rate hike and causing a sharp weakening of the Australian dollar.

Annual headline inflation fell to 6.0% in June from 7.0% in March, which was weaker than the 6.2% consensus and the RBA's own 6.3% forecast. Importantly, the RBA's preferred measure - core inflation - the trimmed mean - slowed to 5.9% from 6.6%, which was slightly less than the market and RBA's expectation of 6.0%.

On a quarterly basis, the Australian consumer price index rose 0.8% in Q2, which is the weakest quarterly pace since September 2021. Economists believe this signals a peak in the interest rate cycle, despite a shift in inflation from goods to services. This shift might push the Reserve Bank of Australia (RBA) to raise rates by 0.25 percentage points in August and September. As a result, Goldman Sachs lowered its peak cash rate prediction to 4.6% from 4.85%, and National Australia Bank expects the RBA to leave rates unchanged in August. Current OCR rate is 4.10%.

AUDUSD, H1 interval, source xStation5

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