Morning Brief – Antipodean currencies the main mover

The main movers during the Asian session were the Australian dollar and the New Zealand dollar, following strong CPI prints from both nations this morning.

Most the action was in the AUDUSD pair, as it climbed above the 0.7100 level as traders priced in more aggressive rate action from the central bank of Australia.

The annual inflation rate in Australia climbed to 7.8% in Q4 of 2022 from 7.3% in Q3, above market forecasts of 7.5%. This was the highest point since Q1 1990, boosted by higher prices for food, automotive fuel, and new dwelling construction.

Food prices rose the most since Q3 2006 (9.2% vs 9.0% in Q3), while cost increased further for transport, housing (10.7% vs 10.5%), alcohol & tobacco, furnishings, recreation, health, and insurance & financial services.

On a quarterly basis, consumer prices went up 1.9% in Q4, after a 1.8% rise in Q3, marking the fourth consecutive quarter to show a rise greater than any seen since the introduction of the Goods and Services Tax in 2000.

Meantime, the RBA Trimmed Mean CPI rose 6.9% yoy, the fastest pace since the series began in 2003, outside the midpoint of the central bank’s 2-3% target. Quarter-on-quarter, the index gained 1.7%.

The inflation rate in New Zealand rose 7.20 percent YoY in the fourth quarter of 2022 at the same level of 7.20 percent in the third quarter of 2022.

The prices rose at a faster pace for food (10.7% vs 8% in Q3), Alcoholic beverages and tobacco (5.9% vs 4.7%), Household contents (8.2% vs 7.1%), and health (8.2% vs 7.1%).

In contrast, inflation eased for housing and household utilities (8% vs 8.7%), and transport (8.2% vs 7.1%). Meantime, the cost of communication fell (-0.3% vs +3.1%). Quarter on quarter, the consumer price index rose 1.4% in the December quarter.

Australian investment bank Westpac are now forecasting a 50 basis point rate hike from the Reserve Bank of New Zealand rate hike at the February meeting.