As mentioned in my earlier post, we have the ABS releasing their reweighting of CPI. If the outcome is positive and we get an opportunity to buy Aussie, which is preferred as we want to trade AUDJPY up until end December, then keep an eye on bullish entry levels. If the outcome is negative and the revised weights reduce the outlook for inflation over 2018 by 0.4 percentage points for headline inflation and 0.3 percentage points for underlying inflation then Aussie is going to weaken so manage your risk as we approach resistance. Note that technicals are indicating Aussie strength in the week ahead though we need to pay attention to price levels as we head into the RBA meeting. Below analysis is based on current price levels and Aussie strength.
RBC on what they expect from the RBA monetary policy meeting
We expect the RBA to leave the cash rate unchanged marking the 15th month of steady cash
Domestic data have been mixed but, on balance, weaker, with core CPI remaining sub-target and retail sales continuing to contract.
Labour market data remain the bright spot in the economy.
Also, due on Friday is the quarterly Statement on Monetary Policy (SoMP). RBC again:
We expect little change to the RBA’s generally upbeat tone although they may acknowledge the softer inflation pulse which may be captured by a small downward revision to near-term forecasts in the SoMP.
Of note, forecasts will now be to a quarter point rather than a broad range, which will give us a better sense of the RBA’s base case and risks.
We expect this new approach to remain consistent with expectations for a return to above-trend growth and within-target inflation by late 2018 and in 2019.