- Paul Bloxham, chief Australia economist at HSBC Holdings Plc
Earlier we have claimed that inflation report will have a muted impact on the RBA's assessment of the domestic economy. A core measure of inflation accelerated more than initially was expected, sending the Aussie to the highest level in two weeks. The AUD/USD currency pair gained 0.47% on the back of inflation report and hit 0.9436, moving closer to a strong resistance around 0.95-level.
The CPI indicator picked up 0.5% in the June quarter, the Australian Bureau of Statistics said, a slight slowdown following a 0.6% rise in the previous quarter. The headline measure of inflation jumped to 3.0% on a yearly basis from 2.9% in the first quarter, hitting the upper limit of the central bank's 2-3% target inflation band for the first time since the first quarter of 2011. At the same time, the trimmed mean measure rose 0.8% over the corresponding period, beating expectations for a 0.6% gain.
While accelerating inflation poses a dilemma for the central bank, which earlier this month resumed signalling they would prefer a weaker currency, meaning there possibility of a rate hike is negligible. At the same time, the economy is facing a slowdown as investment in key mining sector wanes, while the government is planning to introduce severe spending cuts that will become a more serious drag on the Oz economy.
© Dukascopy Bank SA