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Aussie dollar jumps to 2019 high on healthy inflation stats

Posted: 31 January 2019 4:48 pm

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.

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