Tomorrow at 03:30 (GMT+2) important Australian inflation data for Q2 will be released, including consumer price index and core inflation index. In case of the low inflation rate in Q2, the RBA can lower interest rate at the meeting on 2 August.
Since the opening of today’s trading session the AUD is traded up because traders close short positions prior to the publication of the inflation data.
Current interest rate is at the level of 1.75%. Possibility of the reduction in the interest rates by the RBA on 2August is estimated by the market of the interest rate swaps at 70%. Earlier, the RBA said that the necessary of the reduction in the interest rate next month would be decided after the release of the consumer price index (CPI).
The RBA lowered interest rate in May in the result of the poor inflation data for Q1, which was below the forecast.
According to economists, if the quarterly core inflation will meet the predicted level of 0.4%, it will mean that annual inflation is at the level of 1.4%. This will be the record lows.
It will also mean that the target inflation level of 2% -3%, which was set by the RBA, can be reached after many years from now and the authorities of the Central Bank of Australia might need to introduce new incentive measures.
The decline in the interest rate, which is currently at the level of 1.75%, will lead to the fall in the AUD, and in the pair AUD/USD.