The Aussie edged weaker as Australian inflation came in lower than expected again

(1) The Australian dollar retreated slightly on Wednesday, hitting as low as 0.6510, or about 0.34%, as the latest inflation data unexpectedly came in lower than expected, reinforcing expectations that the central bank will cut interest rates next, although it may be months before cutting rates. (2) Australia’s consumer price index (CPI) rose 0.2% in February from the previous month, and the year-on-year increase remained at a two-year low of 3.4%, while analysts had expected it to rise to 3.5% or higher. (3) The three-month annualised inflation rate slowed to 2.4%, within the RBA’s 2-3% target range, but the core inflation measure, the cut-off average of CPI, rose more stubbornly year-on-year. (4) “It’s a mixed bag, but the result puts headline inflation firmly below the RBA’s Q1 forecast of 3.7%,” said Abhijit Surya, a macroeconomist at Capital Economics. ” (5) The market is currently pricing in a 68% probability that the RBA will cut interest rates by 25bp in August. Futures imply a 40 basis point rate cut by the RBA for the full year of 2024, while a 78 basis point cut is expected in the US. (6) The lower technical support level of 0.6503 is where the nearly three-week low reached on March 19 is. Short-term resistance is near the 200-day MA at 0.6548