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Aussie dollar plummets on lower CPI numbers

Announcement posted by de2 Communications 28 Oct 2015

The Aussie dollar plummeted over 50 pips on the back of lower than expected CPI data released this morning.

“The number is much lower than expected and presents absolute no obstacle for the Reserve Bank of Australia (RBA) to lower rates,” said Stephen Innes, senior trader at FX/CFD firm OANDA Australia and Asia Pacific.

“The door is open and the RBA will likely walk through it,” Innes added.

At the same time Innes pointed out that weakness in commodity prices continues to be the main driver in forex land, particularly among commodity block currencies including the Aussie dollar.

“The plunge in oil price has tongues wagging but it looks to be a play on tonight’s US Department of Energy inventory data as weekly American Petroleum Institute showed an increase in inventories.”

According to Innes, “Also driving the Aussie lower is the general risk off tone that has set in globally over the past 24 hours. Local investors are reacting to both falling oil prices and the drop in China September industrial profits.”

Innes added that “As we approach next week’s RBA rate decision, we can expect traders to gradually refocus on recent domestic banks’ mortgage rate hikes and how this will provide more wiggle room for the RBA to lower rates.”

He added that with the European Central Bank signalling additional easing, the US Federal Reserve is likely to hold off on any rate increase.

Innes added, “The RBA will need to step up their game if they want to maintain a weaker currency trajectory.  Surely, this has to be front and foremost in the RBA’s thinking heading into next week.”

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