Having opened a shade above 74c at the start of last week, the Australian Dollar came under selling pressure as the Asian session kicked into full swing. The AUD/USD touched a low of 0.7373 against the US Dollar and with little local data the Aussie remained centred on Chinese currency developments. China’s central bank injected 502 billion Yuan to financial instructions via its one-year medium-term lending facility (MLF) with rates unchanged, a move which was totally unexpected by the market.
Weighing further on the Aussie was U.S data released by the Federal Reserve Bank of Chicago. The National Activity Index boosted by the upbeat production-related indicators jumped up to 0.43 in June from -0.45 in May a move that pushed the US Dollar index higher. On the commodity front, oil, gold and base metal prices were all a tad lower.
Mid-week saw the release of Australian CPI figures, with headline inflation remaining flat at 0.4% q/q which was below expectations and shifted just into the RBA’s target range of 2-3% at 2.1% y/y. Additional, the trimmed mean CPI, which is the RBA’s preferred measure, edged down 0.5% q/q while was on a y/y basis at 1.9% y/y. Market pricing is implying that the cash rate will remain unchanged for a considerable period of time, with a less than 50% chance of a hike in the next 12 months.
To close out the week, Australian Import Prices increased at a faster-than-expected pace in the three months ending June. The import price index climbed 3.2 percent sequentially in the second quarter, faster than the 2.0 percent rise in the first quarter. It was the third consecutive quarterly increase and above the 1.9 percent rise economists had forecast. The increase was driven by higher prices paid for petroleum, petroleum products and related materials, general industrial machinery, electrical machinery, apparatus and appliances. On a yearly basis, imports prices grew at a faster rate of 6.0 percent in the June quarter, after a 2.6 percent gain in the March quarter. Data also revealed that export prices grew 1.9 percent quarterly and by 6.6 percent yearly in the June quarter.