Aussie dollar jumps to 2019 high on healthy inflation stats

Andrew Munro 31 January 2019 NEWS

Below-expected inflation rates, and iron ore and crude oil rises, have put a bounce in AUD's step.

  • The AUD has popped to levels not seen since last year.
  • Healthy findings in Australia's Q4 CPI report have buoyed spirits.
  • Big gains in iron ore and crude oil prices have helped the AUD climb.

The Australian dollar jumped to a new 2019 high against the US dollar, rising to about 73 cents against the greenback on the back of good news from different quarters.

The release of Australia's Q4 consumer price index (CPI) put inflation at 0.5% for the quarter and 1.8% for the year, beating market expectations.

"The price action suggests the market was positioned for a soft outcome," said Rodrigo Catril, Senior FX Strategist at the National Australia Bank to Business Insider.

It was a happy surprise for traders, reflected in the re-pricing.

"The largest contributions [to increases] in the CPI came from the 9.4% increase in tobacco prices and a 6.2% lift in domestic airfares. Offsetting this slightly was a 2.5% fall in petrol prices," said ANZ economist Jack Chambers. "We expect headline CPI to be broadly similar in Q1 2019. The challenge for the RBA is that their November forecast needs an acceleration in core inflation in the first half of 2019 to achieve the expected core pick of 2% by June 2019."

At the same time, big iron ore and crude oil price gains were helping push the AUD upwards.

These factors worked in conjunction with the gentle rate tweaks passed down by the US federal reserve, which may have surprised traders by flying in contrast to the fed's more assertive tones after earlier meetings.

"Instead of aiming for "further gradual increases" in rates, the Fed said it would "be patient as it determines what future adjustments to the target range" — which suggests the central bank may not raise borrowing costs in the foreseeable future," ABC explains.


Forex news

Get more from Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Ask a question
Go to site