Early today the Australian Bureau of Statistics reported a rise in the CPI with 0.6 per cent, which surpassed the initial forecasts for a surge 0.5 per cent and also exceeded significantly the previously reported 0.0 per cent change for the March quarter.
The underlying inflation rate rose to 1.6 per cent over the twelve months to the June quarter, which improved on the reported 1.3 per cent for the twelve months to the March quarter and demonstrated improving monetary conditions in the country. [source]
According to the Australian Bureau of Statistics (ABS), the most significant hikes in prices for the previous quarter were registered in fuel (a surge of more than 10 per cent was reported for automotive fuel prices) which is also the prime reason for the appreciation of the inflation rate with 0.3 per cent, whereas the most significant decrease was attributed to the falling prices of fruits of more than 4 per cent.
Image source: TradingEconomics.com
Subsequently, the observed rise in the underlying inflation rate can be perceived as welcoming news for the Reserve Bank of Australia, which had previously detected the subdued inflationary pressures in the country but has also projected an upwards spike in June because of higher oil prices.
“Inflation pressures remain subdued across much of the economy. Inflation is still, however, anticipated to pick up, and will be boosted in the June quarter by increases in petrol prices. The central scenario remains for underlying inflation to be around 2 per cent in 2020 and a little higher after that.” [source]
This statement is taken from the last interest rate meeting of the Board of Directors of the RBA from the 2nd of July, more on which you can read here. Thus, the economic situation is developing according to the projections and estimations of the RBA, which is prone to increase the investors’ confidence, and they can now look more assuredly on the ultimate success of the RBA’ recent decision to lower the underlying interest rate.
Prior to the release of the new inflation data, the AUDUSD currency pair was trading just above the fundamentally important support level of 0.68650 in yesterday’s trading session, however, the pair was sent trading higher by the positive findings of the ABS’s report and picked up from the support level, which is the first daily appreciation for the pair (as it is the case at 10.30 CET) since the last eight trading days.
This would be the third time that the AUD/USD pair tests the major support level of 0.68650 and given the early indications of the efficiency of the new monetary stance that is being implemented by the RBA in addition to the expected cut of the federal rate by the FOMC later today, the pair could finally find the necessary support to formulate a new bullish trend.
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