BNP Paribas economists expects Australia headline y/y Q1 CPI to slow further, to a 1.8% rate.
"The market has unwound most of its RBA easing expectations, with only 18bp of easing priced over the next 12 months. Therefore, if Q1 CPI data are worse than expected, rates market pricing has room to turn much more dovish on the RBA, leading to a paring back of AUD longs – which according to BNPP FX Positioning Analysis are at their highest levels since 2014," BNPP argues.
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BNPP has stopped out of its short AUD/NZD trade at 1.1265 booking a 1.52% loss, but remains exposed to AUD downside via a EUR/AUD 1.52/1.57/1.62 call fly expiring 3-Jun-16.