Australian CPI figures increase to 6.1%

The Australian Consumer data was released today with Consumer Price Index rising to 6.1% over the past 12 months. For the quarter, the CPI rose by 1.8% which was 0.1% lower then what analysts expected the figure to be. This was also lower then the 2.1% jump seen in the previous March quarter. The most significant contributors to the increase were new dwellings, +5.6%, and automotive fuel +4.2%. Whilst the overall numbers were only slightly off what was expected, the update provided some small relief to a market that has been dealing with record high-inflation.

Australian Treasurer, Jim Chalmers stated that “Inflation is high and rising. It will get tougher before it gets easier.” In response the XJO, (ASX200) saw a big spike, shooting up by 0.36% in the 5-minutes post the announcement. Conversely, the AUDUSD dropped from $0.6946 to $0.6913 in the half hour after the announcement as the market adjusts the value of the AUD to the likely lower interest rates.

Bond Market responds

The bond market responded by lowering its predicted interest rate hike next Tuesday by the Reserve bank of Australia. The interbank futures were implying a 16% chance for a 75-basis point shift before the announcement. However, now the bond market is pricing in a 92% chance of 50 basis point move. Commonwealth Bank of Australia has also confirmed its expectation of a 50-point hike at the next meeting. The bond futures market is also adjusted its prediction of a cash rate of 3.18% by the end of the year against the 3.38% that was forecast before the meeting.

With important data to come out of the USA tonight including Q/Q advance GDP figures as well as the Federal Reserve’s Cash Rate announcement, the end of the week may very well continue to be volatile.