Aussie Dollar Soars after CPI Beats Expectations

The Australian Dollar soared after the third quarter (3q) consumer price index (CPI) came out. The CPI beat analyst expectations causing investor hopes for another Reserve Bank of Australia (RBA) interest rate cut expectations to fade. The headline annual inflation rate came in at 1.3 percent. Analysts expected a print of 1.1 percent. This marks a rebound after the headline inflation rate came in at its slowest pace since 1999 in the second quarter. This number was at one percent.  Looking at the annualized trim inflation number, core inflation trend the RBA looks at closely, crossed the news wires in line with expectations. This CPI printed at 1.7 percent.

After the data came out, the Aussie Dollar, please see above chart, rose with front-end bond yields. This suggest the financial markets are leaning towards a no rate cut decision from the Reserve Bank of Australia in the near future.  However, price-in expectations are already pointing in the direction of no change in monetary policy anytime soon from the RBA. Tone from RBA officials have taken a cautiously upbeat tone over the last month or so as they are signaling a wait and see approach.

This morning, the Australian S&P ASX 500 was mostly lower. Shares of Ardent Leisure fell over eleven perving after four people were killed at their Dreamworld theme park. A ride had a critical malfunction on Tuesday. At the time of this report, 4:00 am GMT time, the ASX 200 was down over 1.5 percent in early afternoon trade hours. Most of the exchanges sub-sectors were down with energy leading the way over 2.6 percent lower thanks to falling oil prices. The heavily weighted financial sector was down 1.45 percent.

Australia’s Big Four banks were all sharply lower as the probability of a rate hike from the RBA is fading. ANZ was down 1.16 percent. The Commonwealth Bank of Australia was down 1.5 percent and Westpac was down nearly 1.3 percent. The National Australia Bank (NAB) was down over 1.3 percent. Most of these losses came after the release of the headline CPI.

Looking at energy plays this morning, this sector was hurt by the ever weakening price of crude oil. Shares of Santos fell over three percent. Shares of Oil Search tumbled over 34 percent and shares of Woodside Petroleum lost over 2.2 percent today. Beach Energy led the energy plays lower as they fell over five percent.