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23 Apr 2014
What to expect from today's Aus Q1 CPI? - Westpac
FXStreet (Bali) - Sean Callow, FX Strategist at Westpac, shares his take on today's key events in Asia, which include Aus Q1 CPI and China's HSBC PMI.
Key Quotes
"After the significant surprise on Australia’s Q4 inflation, there will be considerable tension over the Q1 data at 11:30am Syd/9:30am Sing/HK. The RBA will be hoping the 0.9% jump in core inflation was an aberration, as will interest rate markets pricing no hike until June 2015."
"Westpac’s forecast of 0.7% q/q for the average of the two core measures is in line with consensus though we peg the y/y rate at 2.8% versus 2.9% consensus. We look for 0.9% q/q, 3.2% y/y on headline inflation, with seasonal factors pushing up Q1 and y/y CPI still partly boosted by the carbon price. Housing costs should be another key contributor to inflation. The impact of last year’s AUD slide is the main wild card. Our expectation is only limited further pass-through after the Q4 surge."
"The focus will be on the q/q average of the core measures. A reading in line with our 0.7% call would be neutral for the RBA and AUD. A 0.6% outcome would make Q4 look like an outlier, with inflation quickly returning to a comfortable 2.5% annualized pace, middle of the band. On the topside, 0.8% would be disappointing though the RBA allowed for some H1 persistence of faster inflation in its Feb forecasts (3% y/y on core inflation by June). So perhaps only 0.9% would really stir sharp movement in rates markets and thus AUD."
"At 11:45am Syd/9:45am local we see the ‘flash’ April China manufacturing PMI from HSBC/Markit. The 48.0 reading in March is a very low starting point so a small improvement seems plausible for an economy that recorded 8.8% y/y growth in industrial production in March. Consensus is 48.3, still well below the official PMI which is hovering above 50."
Key Quotes
"After the significant surprise on Australia’s Q4 inflation, there will be considerable tension over the Q1 data at 11:30am Syd/9:30am Sing/HK. The RBA will be hoping the 0.9% jump in core inflation was an aberration, as will interest rate markets pricing no hike until June 2015."
"Westpac’s forecast of 0.7% q/q for the average of the two core measures is in line with consensus though we peg the y/y rate at 2.8% versus 2.9% consensus. We look for 0.9% q/q, 3.2% y/y on headline inflation, with seasonal factors pushing up Q1 and y/y CPI still partly boosted by the carbon price. Housing costs should be another key contributor to inflation. The impact of last year’s AUD slide is the main wild card. Our expectation is only limited further pass-through after the Q4 surge."
"The focus will be on the q/q average of the core measures. A reading in line with our 0.7% call would be neutral for the RBA and AUD. A 0.6% outcome would make Q4 look like an outlier, with inflation quickly returning to a comfortable 2.5% annualized pace, middle of the band. On the topside, 0.8% would be disappointing though the RBA allowed for some H1 persistence of faster inflation in its Feb forecasts (3% y/y on core inflation by June). So perhaps only 0.9% would really stir sharp movement in rates markets and thus AUD."
"At 11:45am Syd/9:45am local we see the ‘flash’ April China manufacturing PMI from HSBC/Markit. The 48.0 reading in March is a very low starting point so a small improvement seems plausible for an economy that recorded 8.8% y/y growth in industrial production in March. Consensus is 48.3, still well below the official PMI which is hovering above 50."