Overview

The fourth quarter (Q4) release of Australian Consumer Price Index (CPI), as well as the monthly CPI for December, scheduled for publishing on early Wednesday, appears the crucial data for the AUD/USD pair traders. The reason could be linked to the Reserve Bank of Australia’s (RBA) recent hesitance in defending the hawkish monetary policy, not to forget downbeat Aussie pair’s trading near the multi-day high.

Not only the headline CPI Q4 and the monthly inflation numbers but the RBA Trimmed Mean CPI for the Q4 also appears crucial to watch for the AUD/USD pair traders.

Forecasts suggest that the headlines CPI is expected to ease to 1.6% QoQ versus 1.8% prior but the monthly CPI could rise to 7.7% YoY from 7.3% previous readings. Further details signal that the RBA Trimmed Mean CPI may inch up to 1.9% from 1.8%.

Ahead of the release, Analysts at the ANZ said,

The trimmed mean, non-tradables and services inflation are the key measures to watch. We expect all of these measures to have lifted strongly in Q4, and for trimmed mean inflation to rise to 6.7% y/y, exceeding the RBA’s forecast of 6.5% y/y.

On the same line, Westpac stated

We see Australia’s Q4 CPI. Robust gains in food prices, rising fuel prices and a bounce in holiday travel prices are all expected to continue pushing headline inflation higher, albeit at a slower pace than observed in the September quarter. Hence, Westpac anticipates a 1.5% and 1.6% lift for the headline and trimmed mean CPI measures respectively (market f/c: 1.6% and 1.5% respectively). The annual inflation rates we expect of 7.4% headline and 6.6% trimmed mean should be the cycle peak.