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AUD climbs up with hotter inflation data

Apr 27, 2022 05:36

  • AUD/USD is holding higher above 0.7180 after Australian Inflation beats with 5.1%.
  • Hotter Inflation has raised the odds of a hawkish stance by the RBA in May.
  • Fears of China’s Covid-19 outbreak and Ukraine crisis creates a dismal market mood.


The Australian dollar got a lift on Wednesday as data showed inflation blew past all expectations last quarter, narrowing the odds on a rate rise as early as next week.

Australian Bureau of Statistics has reported the quarterly Consumer Price Index (CPI) at 2.1%, higher than the market consensus of 1.7% and the prior readout of 1.3%. A closely watched measure of core inflation, the trimmed mean, climbed a record 1.4% in the quarter, taking the annual pace to the highest since early 2009 at 3.7%.

The Reserve Bank of Australia (RBA) in its last monetary policy meeting in the first week of April announced to be data-dependent for a rate hike decision. The CPI took inflation above the RBA’s 2%-3% target band and ended years of undershooting, making it hard to justify keeping interest rates at emergency lows of 0.1%. Thus Investors brace hawkish stance from RBA.

However, The US dollar dominance keeps the further upside capped in the aussie pair. The US dollar continues to gain attention as global growth concerns and aggressive Fed rate hike bets spook investors favoring the safe haven – dollar.

The announcement by Fed chair Jerome Powell in his testimony at the International Monetary Fund (IMF) meeting that a 50 basis point (bps) interest rate hike is on the cards has improved the appeal for the safe-haven assets.

The Fear of China’s Covid -19 outbreak and Ukraine crisis weighs on the consumer sentiment and favors the safe haven dollar. The spread of the China Covid-19 outbreak from Shanghai to some districts of Beijing threatens to spur additional lockdowns, which consequently will disrupt the supply chain. Meanwhile, the Ukraine-Russia conflict escalated as Gazprom halted gas deliveries to Bulgaria, while Polish firm PGNIG said Russia would stop gas deliveries starting April 27th, according to Reuters.

AUD/USD 4 Hour Chart:

Support: 0.7082 (S1), 0.7044 (S2), 0.6971 (S3).

Resistance: 0.7194 (R1), 0.7267 (R2), 0.7305 (R3).

The Aussie remains favored with the upbeat CPI report, we expect a bullish trend for AUD/USD.

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