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Trading the News: Australia Wage Price Index (WPI)

Another 2.3% print for Australia’s Wage Price Index (WPI) may do little to curb the recent decline in AUD/USD[1] as it puts pressure on the Reserve Bank of Australia (RBA) to implement a rate-cut in 2019.

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The RBA may continue to strike a dovish tone at the next meeting on June 4 amid the threat for below-target price growth, and the central bank may take additional steps to insulate the economy as ‘a further improvement in the labour market was likely to be needed for inflation to be consistent with the target.’ In turn, signs of subdued wage growth may produce headwinds for the Australia dollar as it spurs bets for an imminent rate-cut, and the central bank may have little choice but to reestablish its easing-cycle especially as the U.S. and China, Australia’s largest trading partner, struggle to reach a trade deal[2].

However, an unexpected pickup in the WPI may generate a short-term rebound in AUD/USD as it encourages Governor Philip Lowe & Co. to be patient and retain a wait-and-see approach for monetary policy. Sign up and join DailyFX Currency Strategist David Song LIVE[3] for an opportunity to discuss key themes and potential trade setups surrounding foreign exchange markets.

Impact that Australia’s WPI had on AUD/USD during the previous release

Period

Data Released

Estimate

Actual

Pips Change

(1

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