Morning Brief – Australian inflation ramps up

The Australian dollar moved higher against the US dollar this morning after the Australian Monthly Consumer Price Index indicator for the month of November came in at 7.3% year on year versus the prior 6.9%.

A gradual move higher was seen for the AUDUSD pair as it gravitated above the 0.6900 level. A number of other economic releases also came from the Australian economy today.

Breaking down the report, the most significant price rises were Housing (+9.6 percent), Food and non-alcoholic beverages (+9.4 percent), Transport (+9.0 percent), Furniture, household equipment, and services (+8.4 percent), and Recreation and culture (+5.8 percent).

ANZ bank said about the CPI inflation report “Monthly CPI rose to 7.3% y/y ahead of electricity impacts. These results reduce any risk of a Feb pause for the RBA and reinforce our view that the peak cash rate will be at least 3.85%.”

And “The monthly numbers only include updated prices for between 62 and 73 percent of the weight of the quarterly CPI basket; thus they are incomplete and its rightly so that the quarterly CPI is the most focus.”

Also this morning Australia’s retail sales jumped 1.4% m/m in Nov, and Oct was revised up from -0.2% to +0.4%. This was a strong result, but weaker than the growth in Nov 2020 +6.1% month on month and +6.4% month on month.

ANZ bank commented on the jobs data “job vacancies stayed very strong at 444,200 in November. Despite falling on the quarter they did remain historically high, yes. “

Traders now await the CPI report from the US and JP Morgan are expecting higher numbers and say, “the December monthly and Q4 quarterly CPI will be published prior to the February meeting”.

They note that “Our scenario analysis is skewed bullishly based upon positioning that could cause an overreaction via short covering on a dovish print.”

However, if the CPI is higher than 6.6 percent JP Morgan the number would be “expected to hit risky assets with bond yields rising along the curve.”