The Australian Dollar (AUD) is under the gun after below forecast Aussie Consumer Price Index (CPI) data. Economists at Société Générale analyze AUD/USD outlook.
Australia’s CPI steady at 3.4% in January, core eases to 4.1%
The RBA will draw comfort from the January CPI data but will not declare victory.
The inflation rate held steady at 3.4%, failing to pick up momentum as expected. Core inflation also decelerated to 4.1%, marking its lowest point in two years. Although progress appears slow, the central bank can have confidence in the unfolding of the base case. There is a belief that inflation will naturally revert to the target range of 2-3% by 2025, eliminating the necessity for further tightening measures.
The AUD/USD chart doesn’t inspire confidence, echoing the early February scenario when the brief breakthrough above the 200-DMA didn’t sustain. Maintaining support at 0.6480 is crucial to prevent a more pronounced retracement.
