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Australia’s inflation falls to 3-year low, Aussie dips lower

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The Australian dollar has edged lower on Wednesday, after surging 1.1% since the start of the week. In the European session, AUD/USD is trading at 0.6879, down 0.18%. Earlier, the Australian dollar rose above the 0.69 level for the first time since February 2023.

Australia’s CPI drops to 2.7%

Australia released August CPI on Wednesday, a day after the Reserve Bank of Australia held the cash rate at 4.35%. Headline CPI rose 2.7% y/y, down sharply from 3.5% in July. This was very close to the market estimate of 2.8% and the Australian dollar’s reaction to the release was muted. The decline was driven by a sharp drop in electricity and fuel prices.

The markets may not have been impressed but the inflation reading was the lowest since August 2021 and the first time since then that inflation has fallen to the RBA’s target range of 2%-3%. Significantly, core CPI also fell within the target range, easing from 3.7% to 3.0%.

In an odd twist, the inflation report came a day after the RBA meeting, with the rate statement noting that inflation remains too high. Governor Bullock reiterated in her press conference that there would be no rate cuts in the “near term”, but if inflation continues on its downward path, the central bank will be under strong pressure to reconsider.

The US Conference Board consumer confidence index is usually not a market-mover but a very soft reading on Tuesday sent the US dollar sharply lower against most of the major currencies. The index slipped to 98.7 in September, down sharply from a revised 105.6 in August and below the market estimate of 103.8.The Australian dollar, which showed little movement after the RBA decision, climbed after the consumer confidence release and closed on Tuesday up 0.86%.

AUD/USD Technical

  • AUD/USD is putting pressure on support at 0.6866. Close by, there is support at 0.6840
  • There is resistance at 0.6919 and 0.6945

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Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.
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