Today, following the release of the inflation data in Australia for Q1, which was below the forecast, the AUD sharply fell on the currency market. It became known that consumer price index (CPI in Q1 fell to -0.2% against the forecast of +0.3%. On the annual basis the rise was +1.3% against the forecast of +1.8.
In the pair AUD/USD the Australian dollar fell by over 140 points, while in the pair AUD/NZD the Australian dollar fell by 160 points against the NZD. The economies of New Zealand and Australia are export oriented and closely connected. The main items of export in both countries are commodities and the largest buyer of these commodities is Chine.
Compared to the other major currencies of the world, the AUD has been steadily rising against the USD in the last few months amid positive economic statistics of Australia. The decline in inflation indices in the country in Q1 was rather unexpected causing sharp decline in the national currency. Annual base inflation amounted to only 1.7% against the forecast of the rise by 2.0% and the actual rise by 2.1% a quarter earlier.
The slowdown in inflation rate combined with the very low pace of the rise of wages may prevent the achievement of the target inflation rate set the RBNZ at the level of 2%-3%. Now, there are more chances that the RBA will follow the example of the other central banks and will lower interest rates at the meeting on 3 May. If this happens and the bank will also indicate possibility of the further monetary policy easing, the AUD will continue decline.
Today’s news will include interest rate decision by the US Fed and following up comments of the US Fed (20:00 и 20:30 GMT+2) and interest rate decision by the Reserve Bank of New Zealand at 23:00. During rise period volatility in the financial market and in the pair AUD/NZD may increase.