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With Australia’s central bank surprising the markets with a lower-than-expected rate hike at its latest meeting, investors are awaiting several big economic reports, including the inflation data, due this week.
What has the RBA done so far to combat inflation?
The Reserve Bank of Australia lifted its cash rate by 25 basis points to a nine-year high of 2.60% at its recent meeting, surprising the markets, which had been expecting a larger hike. The RBA explained that since rates had been raised substantially in a short span of time recently, the decision was made to slow the pace at this meeting.
The latest rate hike was the sixth increase by the RBA since May, increasing rates by a total of 250 bps. Consumer prices for Australia increased 7% during the year to July, with the rate falling to 6.8% in August, according to the Australian Bureau of Statistics.
Which economic reports are due this week?
Starting Monday, Australia will release data on the services and manufacturing PMI for October. The S&P Global Australia manufacturing PMI, which was revised lower to 53.5 in September, is expected to have declined further to 52.4 in October. The services index is likely to have fallen to 50.1 from 50.6. Australia will also release its Federal Budget on Tuesday, along with updates to key economic forecasts.
The much-awaited data on inflation will be released on Wednesday, with the annual inflation rate expected to remain at 6.1% for the third quarter, the same as in the previous quarter.
Data on import and export prices will be released on Thursday, while the PPI data is scheduled for release on Friday.
AUD/USD prospects
The Australian dollar has tumbled to its weakest level in two-and-half years against the US dollar amid continuous strength in the greenback, following aggressive rate hikes by the US Federal Reserve. The AUD/USD forex pair might receive some support in case this week’s economic reports are better than the market expectations.
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