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Australian inflation expectations up (for now)

Consumer inflation expectations hit 3.7%, up from 3.4% previously, but in an environment when household spending is down then higher inflation expectations are not likely to lead to extra household spending. 

Consumer inflation expectations may be lower next month due to China Devaluation
Due to the survey being taken before China devalued their currency (twice) this week, we could well see consumer inflation expectations lower next month if concerns over Australia’s key trading partner persist. With a weaker Yuan, imports to China from Australia become more expensive, which will negatively impact growth in Australia. RBA will be closely monitoring events in China and, judging by the amount of media coverage the devaluation s receiving, so are the general public.
AUD retains its ‘Battler title’
The Australian Dollar certainly lived up to its ‘battler’ title in last night’s US session, clawing back 172 pips after breaking to a fresh 6-year low at 0.7215 during the Asia session. Finally closing the session 1% higher at 0.7377, at one point it was down -1.2%. The miraculous recovery was aided by inflows to Euro and JPY, which weighed the USD down and helped support AUD in the process.
Eyes on US Retail sales: AUD could break 74c
With volatility and whipsaws the theme of the week the markets will now shift focus to tonight’s retail sales and employment data from the US. Judging by the recovery from AUD yesterday then any weakness in data tonight could see AUD break back above 74c, a number which seemed unachievable only this time yesterday. 


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