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Aussie Inflation Remains Neutral, But Is Risk Off On The Horizon?

Jason Shemtob

THE TAKEAWAY: Aussie inflation remains stable > RBA action seems unlikely, but Cyprus may lead to more risk-off sentiment > AUD Outlook Neutral

Australia’s TD Securities Inflation numbers released on Wednesday came in mixed with month over month inflation growth for March slightly above February’s levels at 0.2%, but the year over year growth was 2.1%, below February’s level of 2.4%. These numbers point to a relatively stable level of inflation for the nation down under. The Aussie jumped slightly against the dollar following the inflation data release, but then quickly retreated back to previous levels.

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The Australian dollar has risen steadily over the last month thanks to greater risk on sentiment and anticipation of little central bank action. RBA head Stevens has been mum of late regarding the possibility of a rate reduction in case of a slowing economy. Currently, based on the credit Suisse Global Overnight Index Swaps Directory, the market appears to be placing a 8% chance of a 25 basis point rate cut during the next central bank meeting, scheduled for April 2nd. The Aussie may face some downward pressure moving forward, however, due to a renewal in risk of sentiment caused by the Cyprus banking crisis, which has lead to further Euro-zone break up fears.

AUD/USD (30 Day Chart)

Aussie_Inflation_remains_But_Is_Risk_Off_On_The_Horizon_body_Picture_1.png, Aussie Inflation Remains Neutral, But Is Risk Off On The Horizon?

Created by Jason Shemtob using Marketscope 2.0

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