Forex Flash: AUD/USD faces bigger negative reaction than positive on Aus CPI Q2 - NA

[Rey Nuevo]

FXstreet.com (Barcelona) - The standout event for Asia is the Australia Q2 CPI report, which according to NAB research team, is not expected to have a material impact on RBA policy expectations for the next week board meeting unless the two core measures deviate sharply from the 1.9% YoY consensus estimates.

 

NAB note reads: "A significant upside surprise would see expectations for another near term RBA rate cut pared back (about 50% for the August meeting) with positive implications for the currency. On a downside surprise, even though we regard benign inflation readings as a necessary but not sufficient condition for further easing, knee jerk currency reaction should be negative."

 

In any event, NAB warns that worsening sentiment running into the release may limit a bullish reaction on a surprise upside outcome; "as things stand, there may be a bigger negative reaction to a downside surprise, putting 1.0200 under threat" NAB says.