The major release for AUD in the week ahead is Australian Consumer price Index (CPI) data for the first quarter of 2024, out on Wednesday, April 24.
Analysts expect Q1 CPI to rise 0.8%, compared to 0.6% in Q4, though base effects will see the annual pace easing to 3.4%, from 4.1%.
“Westpac’s forecast for the trimmed mean is 0.8% for the quarter, taking the annual pace from 4.2% YoY to 3.8% YoY, the slowest since March 2022, says Richard Franulovich.
The Reserve Bank of Australia (RBA) is not expected to cut rates before the Federal Reserve (Fed) which is another supportive factor for the AUD/USD. Relatively higher interest rates support currencies since they encourage more capital inflows. Whilst the RBA has set base interest rates at 4.35% against the Fed’s 5.25%-5.50%, favoring the US Dollar overall, whether or not the differential widens or closes is a key factor for AUD/USD’s valuation.
Current market expectations are for the RBA to cut interest rates in December after the Fed cuts in September/November, according to Westpac’s Franulovich. This is supporting AUD/USD since the differential is expected to narrow.
However, Wednesday’s Aussie CPI data could be key in this regard since, “A softer than consensus Q1 CPI could galvanize the potential for RBA rate cuts before the Fed,” says the Westpac analyst, which would translate into further downside for the AUD/USD.
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