Aussie Trades x2
Australia’s January CPI came in softer than expected at 2.5% year-over-year (vs. 2.6% forecast), exactly the same as December’s reading. That’s decent news for anyone worried about a sudden inflation spike that could force the RBA to hike rates again. While the monthly figure isn’t the RBA’s favorite metric—they usually focus more on the quarterly data—this does help reinforce the idea that inflation is relatively contained for now.
Governor Michele Bullock recently cut the cash rate to 4.1% and signaled a cautious approach to future moves, saying the RBA needs to see more data before shifting gears again. Deputy Governor Andrew Hauser echoed that view, reminding everyone not to overreact to one monthly CPI print. Still, the data keeps the door open for another rate cut around May or July if things keep trending lower.
On the market side, this softer CPI outcome should prevent Aussie bond yields from pushing much above their US counterparts—especially when chatter about a US growth slowdown is picking up. That’s generally supportive for local equities and fixed-income instruments. With that in mind, here are my two trades:
