Aussie CPI and the RBA's ongoing headache

Well, that Australian CPI print for April just dropped, and it certainly wasn't the slowdown the RBA was hoping for. Annual CPI coming in at 3.6% against expectations of 3.4% is going to give Bullock and her team a real headache. They've been trying to walk this tightrope of not overtightening while bringing inflation down, and this data point isn't making their job any easier. It puts rate cut expectations even further out, potentially even bringing back whispers of another hike, though I think that's a bit of a stretch at this point given the lag effects of their previous actions.

From a currency perspective, it's pretty clear what this means for $AUDUSD in the short term – some bullish momentum on the back of higher-for-longer rate expectations. The market loves that yield differential, doesn't it? I'm watching to see if this has any knock-on effect on the cross-pairs. Thinking about $AUDNZD, for instance, given the RBNZ is arguably in a similar, if slightly more hawkish, boat. Definitely keeping an eye on how this plays out in the wider APAC bloc, and whether we see any contagion in other rate-sensitive pairs. Still think $ZARJPY at 9.918 is holding up remarkably well, considering everything else going on.