Australian dollar tumbles, rate cut certain

Financial and commodity markets analytics

The Australian dollar got crushed today after a round of disastrous CPI numbers all but certain guaranteed that the RBA will cut interest rates by the end of the year.

At 3.30pm (GMT) the Aussie dollar was trading at US71.30c, after falling from US71.98c in yesterdays close.

The latest quarterly CPI numbers from Australia came in at 0.5 percent, well under expectations for a figure of 0.7 percent, while the yearly figure hit the market at 1.5 percent against a consensus of 1.7 percent.

The RBA has a target inflation rate of between 2 and 3 percent so they must have been quite shocked by the news and will probably have to cut rates at least twice in the nearest future from 2 percent to 1.5 percent in order to hit their inflation target.

Analysts now predict that the Central Bank has nothing standing in their way and are free to cut interest rates with over 60 percent now predicting this will happen next week with a further 85 percent predicting a move in December.

Iron ore, Australia’s biggest export has also dropped below the psychological US$50 a tonne level and is becoming a big drag on the Australian economy and must also be playing on the RBA’s mind.

In the American session today will see the latest interest rate decision from the US Federal Reserve and although no changes in rates are expected, any bullish tone in the accompanying monetary speech may see the Aussie dollar crash down through the US70c mark.


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