Core Inflation Dips but Trimmed Mean bang on target
We saw the usual whipsaws whilst the data points were released to market as traders scurried to place their bets. We saw a low of 0.74 as the data was released to market but it was the trimmed mean hitting expectations on the nose with 2.2% that had the final say, sending the Aussie higher to 0.7438 within minutes of the release.
RBA need the annualised trimmed mean to remain above 2%, the lower range of their inflation target, to justify rates to be kept at 2% and this is what resulted in the Aussie spiking higher with today’s data.
Glenn Stevens is speaking shortly which could now provide further direction if Stevens tips his hat at today’s data set. I’ll be keeping a close eye on any comments regarding the FED and recent plunge in commodity prices, as this could prevent FED raising rates and place extra pressure on RBA to cut later in the year. Unless Stevens raises too much concern about this potential scenario then we may have seen our low for the day at 74c
After the inflation read was absorbed by the market we see AUD testing 74c. This is a clear line in the sand for bulls and bears leading up to Stevens speech and UK/US session.
A break below this key levels means we can probably get over the 'OK' inflation data and focus on strong USD and weak commodity prices (all which drag AUD down).
One technical level there is a glimmer of hope for the bulls after printing a Morning Star Reversal Pattern at, what could turn out to be, the low of a Bullish Wedge formation. If we do see a break below 74c then we can wait to see how price reacts near the lows as we could start to carve out a sideways range, which AUD has a tendency to do after strong moves (and the media are closely following its every move).
US data is light so this is a potential scenario but we will also have to keep an eye on plunging commodity prices along the way.
Trimmed Mean Inflation throws RBA Hawks a lifeline
Headline inflation for Q2 dipped below expectations on an annualised and quarterly basis. However it was the trimmed mean, the preferred inflationary gauge for RBA, which traders were keeping a close eye on.