(31 JULY 2019)DAILY MARKET BRIEF 2：AUD buoyed by solid consumer prices

AUD bulls should be very satisfied with the recent release of upbeat inflation data in the second quarter. After falling by over 1% against the greenback, the Aussie is set for a major rebound since the Reserve Bank of Australia is no longer going to work on autopilot mode and turn more optimistic when it comes to the economic outlook.

Concerns on the front of inflation are reduced as both 2Q quarter-on-quarter and year-on-year headline CPI came at 0.60% (prior: 0%) and 1.60% (prior: 1.30%) respectively while the 12-months core metric also overshot expectations by 0.10% at 1.60% (prior: 1.60%). Major contributors to the rise are automotive fuel (+10.20%), medical and hospital services (+2.60%) and holiday, travel and accommodation (+2.70%). Although GDP data is not supposed to be released before early September, FX traders are likely to favor a bullish bias on AUD as the RBA already cut its Cash Rate two times in June and July by -0.25% each while today’s Fed decision should support the upward trend. Following the change of forward guidance and its willingness to “adjust monetary policy if needed”, the RBA is therefore less prompt to intervene considering current developments. RBA board members are expected to gather next Thursday.

Currently trading at 0.6892, AUD/USD is heading along 0.6910 short-term, bouncing from 0.6872 (30/07/2019 low).