Australian TD-MI Inflation Gauge Disappoints, AUD Exchange Rates Unperturbed
The Australian Dollar US Dollar (AUD/USD) exchange rate continued its bullish run on Monday, seemingly unperturbed by recent disappointing inflation readings.
Figures from the Melbourne Institute and TD Securities revealed that Australian inflation printed at 2.3% year-on-year in December, down from the previous period’s 2.7%.
On a monthly basis, prices rose by 0.1%, down from November’s 0.2% climb.
This news failed to have a noticeable effect on the AUD/USD exchange rate, however, with any inflation gauge reading above the key 2% level largely deemed good news for Australian Dollar bulls.
This is because a figure between 2-3% remains within the Reserve Bank of Australia’s (RBA) target range.
US Dollar (USD) Exchange Rates Suffer on Bank of Japan (BoJ) Remarks
US Dollar (USD) exchange rates continue struggling as a result of recent remarks from the Bank of Japan (BoJ) and officials in China, with the BoJ asserting that it will trim its purchase of US corporate debt and Beijing reportedly considering revising its purchase of US bonds.
Officials have dismissed the reports from Beijing as being based on ‘false information’, though markets are nonetheless apprehensive.
In slightly better news, the recent rise in core US inflation bodes well for the possibility of US Federal Reserve rate hikes in 2018, with the credit ratings agency Fitch optimistically claiming that this could mean 4 rate hikes this year, rather than the initially forecast 3.
James McCormack, in charge of Sovereign Ratings at the Agency stated:
‘Our impression of the Fed is that it wants to get on with this, and the rationale for leaving rates lower for longer has disappeared’.
Nonetheless, there are dissenters within the Fed, with Philadelphia President Patrick Harker notably claiming that only 2 hikes are warranted this year.
AUD/USD Exchange Rate Forecast: RBA Rate Hike Forecast in 2018
The Australian Dollar (AUD) could get even more of a boost in 2018 if the market outlook for the Reserve Bank of Australia (RBA) proves correct.
The latest charts from the National Australia Bank (NAB) suggest that the RBA could join the likes of the Bank of Canada, the US Fed, and the Bank of England, with a 25 basis point increase sometime this year.
This is consistent with the recent HSBC Australia report that predicted a rate hike in mid-2018; an eventuality that would mean the first rate hike since 2010.
In the meantime, markets will be assessing tomorrow’s Aussie Westpac consumer confidence readings and Thursday’s Aussie employment figures – both events that could put AUD/USD under pressure.