THE TAKEAWAY: Australian consumer prices rise by 2 percent, beating expectations > Forex Traders appear to have lowered expectations for further RBA rate cuts > Aussie gains
The Australian Dollar traded higher versus its major counterparts as consumer prices in rose by 2 percent in the third quarter, year over year, beating expectations set at 1.6 percent. On a quarter over quarter basis, prices for consumer goods rose by 1.4 percent, also outperforming estimates.
The recent uptick in prices may be the result of the Reserve Bank of Australia’s monetary easing over the last six months as policy officials slashed the cost of capital in May, June, and Ocotber of this year in an attempt to counter economic slowing in both Europe and China.
Forex traders likely reacted to the better than expected figures as a sign the Reserve Bank of Australia may opt not to further reduce the benchmark lending rate during the next scheduled policy meeting on November 6. Prior to the release, FX market participants had priced in a 82 percent probability of a 25 basis point reduction to rates next meeting. However, immediately following the positive print Forex traders appear to have re-priced the probability of another round of rate cuts down to a 62 percent chance, providing confirmation behind the broad based buying of Aussie dollars.
AUD/NZD, 1 Minute Chart