Q2 CPI In Focus Tomorrow

The main data event for Australia this week lands tomorrow, with Q2 CPI data out. To recap, market expectations are headline CPI to ease to 1.9% QoQ, from 2.1% in Q1. The YoY pace would still accelerate to 6.3% from 5.1% in Q1. For the RBA's preferred measure of underlying inflation, the trimmed mean, the market expects a further pick up to 1.5% QoQ from 1.4% in Q1. This would take YoY momentum, to 4.7% from 3.7% previously.

• The table below shows quarterly outcomes for headline and trimmed inflation over the past year.
• As has been the case elsewhere, in recent quarters inflation has been surprising on the upside. 0.4ppts and 0.3ppts for the headline in the past 2 quarters, 0.2ppts and 0.3ppts for the trimmed mean for the same reference periods.
• Q1 CPI data, which printed on April 27th produced a decent intra-day bounce in AUD/USD. We got to a high of 0.7191 on the day, but closed little different (0.7126 versus 0.7123) versus the previous session. The DXY was trending higher at this time though, so that may have influenced the AUD.
• 2yr AU bond yields ended April 27^th around 3bps higher and continued to push higher over subsequent sessions.

Table 1: Australian CPI Outcomes - Actual & Expected QoQ Past 12 months