Aussie Dives As Highly Anticipated CPI Print Misses, Lowe On Deck

Ok, so believe it or not, you’re going to need to parse the Australian CPI print.

After a dramatic (as these things go) week, the aussie is in focus on Tuesday as traders are looking to the data and also to a speech from RBA Governor Lowe for clues about what to expect from the RBA going forward.

You’ll recall that last week the aussie moved sharply higher on ostensibly hawkish RBA minutes, only to be jawboned lower on Friday by Deputy Governor Guy Debelle, in what amounted to a mad scramble to walk back the FX equivalent of a rate hike.

Here’s a quick visual recap for those who missed it:

AUDUSD

And here’s why this is a precarious situation for the RBA:

AUDUSD1

You’ll also note that the signal conveyed by Caterpillar’s earnings underpins AUD as well.

All of that probably sounds esoteric to most US investors, but it’s a pretty important piece of the global macro puzzle and it’s part and parcel of this idea that it’s going to be exceedingly difficult for central bankers to get the messaging right when it comes to telegraphing rising rates without prompting markets to frontrun the normalization and cause currencies to overshoot in the meantime.

Without further ado, here’s the data, and it’s a miss:

  • AUSTRALIA 2Q CONSUMER PRICES RISE 0.2% Q/Q; EST. 0.4% (1.9% Y/Y; EST. 2.2%)
  • AUSTRALIA 2Q TRIMMED MEAN CPI RISES 0.5% Q/Q; EST. 0.5%

Here’s the knee-jerk:

Aussie

Now cue the dip buying and also cue Lowe…

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