AU Q4 CPI review and what comes next for the AUDUSD?

Australian inflation for Q4 surprised to the upside, continuing a trend seen across many major developed markets in recent months.


Headline consumer prices rose by 1.3%, higher than the 1% expected by economists taking the annual inflation rate to 3.5%. The trimmed mean or core inflation (the RBA’s preferred gauge of inflation) rose by 1%, taking the annual rate to 2.6% y/y, its highest level since Q3 2008.

Notably, the annual rate of core inflation is now above the mid-point of the RBA’s target 2-3% band for the first time since mid-2014, an indication inflation is sustainably higher.

As expected, the rise in inflation was driven by the rising costs of new dwelling construction and a rise in petrol prices, which together accounted for almost half of the quarterly increase in CPI.

While some of the rise in inflation was related to Covid disruptions, the higher starting point means that should the RBA see wages inflation growth accelerate as expected by the middle of the year, a rate hike in the second half of 2022 is becoming increasingly likely. More so given last week's robust employment data that saw the unemployment rate fall to 4.2%.

The prospect of higher interest rates boosted the AUDUSD from .7150 pre the data up to a high of .7175. However, with risk assets including the ASX200 and US equity futures trading heavily during the session, there has been little in the way of follow-through buying.

Technically the preferred view is that the AUDUSD has completed a medium-term low at .6993 and can continue to grind higher within the trend channel below in the coming weeks towards .7400c.

AUDUSD Daily Chart 25th of Jan

Source Tradingview. The figures stated areas of January 25th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

How to trade with City Index

You can trade with City Index by following these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    Open an account in the UK
    Open an account in Australia
    Open an account in Singapore

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade



Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.