Australian CPI is massive

The OIS market is pricing in a 75% chance of a rate cut on Nov. 1 but it can’t happen if today’s CPI release – out in two hours — is high.

AUD/USD is at 1.0431, recent range is 1.04-1.05.

The number to watch is the q/q trimmed mean. The market is neutral on a reading of +0.6%-0.7%. A reading of +0.8% and we will retest the top of the recent rage. A reading of +0.5% or lower and we will fall below 1.04 quite quickly. We may even see 1.0365.

In my opinion, it’s impossible to buy AUD right now, given the recent run up. The only trade is to sell AUD on a soft reading today, cover a day or two ahead of the RBA and then sell aggressively if officials are dovish or cut.

McCrann’s column today is worth a look, even if he’s been way off base for awhile now.

Update: here’s a handy chart showing the effects of the recent Australian CPI benchmark revisions. Fairly dramatic.

Also, here is the complete list of expectations:

Indicator/Event Period f/c Prev

Consumer price index q/q Q3 +0.6 +0.9

Consumer price index y/y Q3 +3.5 +3.6

Weighted median q/q Q3 +0.6 +0.5

Weighted median y/y Q3 +2.7 +2.6

Trimmed mean q/q Q3 +0.6 +0.7

Trimmed mean y/y Q3 +2.6 +2.5