The Australian dollar fell to a three-year low on Friday at 0.8757 and is flat today. The pair broke down on Thursday to a multi-year low but the lack of follow through has raised some eyebrows.
One reason for the lack of conviction could be the quarterly inflation report due in the hours ahead. The report will be released at 0030 GMT and calls for a 2.4% y/y CPI rise after a 2.2% rise in Q3. The quarterly pace of inflation is expected at 0.6%. That’s the kind of inflation pace that could keep the RBA on the sidelines despite the worsening employment situation. The weakness in the Australian dollar have added the equivalent of about 150 basis points of cuts in the past year.
If inflation shows weakness, however, it could give the RBA more ammunition and tip AUD/USD toward 0.8500 and below.
