Response from Goldman Sachs on the Australian inflation data

(Data is here: Q1 Australia headline inflation: 0.5% q/q (expected 0.6%) )

  • The data is net a touch weaker than expected
  • Important to note that there is a clear reacceleration at both the headline level (2.1% YoY vs. 1.5% last quarter) and underlying levels (Trimmed Mean: 1.9% vs. 1.6% last & Weighted Median: 1.7% vs. 1.4% last)
  • Headline CPI is now in the RBA's 2-3% target band for the first time in 9 quarters
  • Headline CPI would have to print incredibly soft (0.1-0.2% QoQ) next quarter in order to undershoot the RBA's forecasts
  • We think this is very conservative and hence we see upside risks to the RBA's forecast
  • We think there is sufficient momentum for RBA to upgrade their headline inflation forecasts over next few months and their underlying inflation forecasts later this year

On the currency response, GS like the AUD here (bolding mine):

  • AUDUSD rallied from 0.7535 to 0.7557 highs going in. and subsequently printed 0.7509 lows/0.7513 last
  • AUDNZD traded from 1.0855 to 1.0865 ahead of the number, then 1.0823 lows/1.0827 last
  • From a fundamental perspective, this weakness is probably a fade