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Australian Q2 inflation comes in close to expectations.

Written by Sam Coxhead on July 25th, 2012.      0 comments

2:25 PM (NZT) The market wide risk aversion has continued on from the dramatic end of last week. The US dollar and Japanese YEN have been in demand as the equity indexes have slumped. Most to the risk aversion has been driven by Euro-zone fears but there has been some soft economic data and earnings results in the US as well.
Government bond yields have pushed through to record lows in the US, New Zealand, the UK, Japan and Canada. In Spain and Italy the bond yields have pushed through to record highs, a clear example of the funding pressures at play.
The just released 2nd quarter Australian inflation numbers reveal a +.5% rise for the quarter. This comes in close to a market expectation of a .6% increase, and is against just +.1% rise in the first quarter. Given it places the annual inflation rate at comfortable levels, the RBA are in a position of being able to ease the cash rate further from the current 3.50% in deemed necessary to stimulate growth.
Yesterday saw a modest bounce in the Chinese manufacturing numbers to a 5 month high. The sector is still contracting , but certainly by a smaller margin than in previous months. This is mildly AUD supportive.
The AUD has seen a small rise across the board since the inflation data was released. Given global inflation numbers have been coming in below expectations lately, this is not major surprise.
The RBNZ statement accompanying what will be an unchanged cash rate tomorrow now comes the focus for those with interests in the NZ and AU dollars. Interestingly the AUD has continued its pressure on the NZD this week and has broken through the substantial support at .7680 (resistance 1.3020). Given the momentum is in the AUD’s favour we may see further appreciation yet, but certainly from a risk reward point of view, current levels offer great value buying of NZD with AUD.
          Past 24 hours
  Current level Pre-AU CPI  % Chge since AU CPI   Low High
NZD/USD 0.7816 0.7813 0.04%   0.7807 0.7926
AUD/USD 1.0220 1.0192 0.27%   1.0186 1.0319
NZD/AUD 0.7649 0.7667 -0.24%   0.7690 0.7646
AUD/NZD 1.3074 1.3043 0.23%   1.3079 1.3004
NZD/GBP 0.5042 0.5043 -0.02%   0.5039 0.5106
NZD/EUR 0.6476 0.6478 -0.03%   0.6472 0.6541
NZD/YEN 61.11 61.06 0.08%   60.97 62.02
NZD/CAD 0.7990 0.7993 -0.04%   0.7984 0.8069
Topics: Australian Inflation