Australian inflation comes in slightly below forecasts, AUD weakness as a result

Will AUDAUD to GBP Slips as Australian States Tighten Borders to USD Retest the All-Time Lows?

Today Australian inflation figures were released and fell slightly below analysts expectations, leading to a slight drop in value for the Australian Dollar over the course of the trading day.

Expectations had been for inflation to come in at a level of 0.5% however the figure released only came in at 0.4%, the annual rate posted at 1.95%, this does show that inflation is rising but we are still seeing the level of inflation posting below the target rate that the Reserve Bank of Australia have which is a level of 2.5%.

This will more than likely lead to the RBA now continuing to hold off on any interest rate hikes, and I would still be surprised to see a hike in interest rates for Australia this year, although of course a lot can change in the currency markets over a few months so watch this space!

The reason the lower inflation figures led to a slight drop in value for the Australian Dollar is that this has dampened the chances of an interest rate hike happening in the near term, and an interest rate hike is generally seen as positive for a currency. With the markets moving on speculation as well as an actual event happening, the fact that an interest rate hike is now deemed to be further away for Australia then leads to weakness for the Australian Dollar.

With numerous other central banks around the world inclusive of the U.S and U.K now making their moves and raising interest rates we are starting to see a flow of money come out of the Australian Dollar and moved into these perceived safer currencies as the rate of return is getting closer to that of the AUD if not better.

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