Q2 Australian CPI preview and what comes next for the ASX200

Research
Tony Sycmore
By :  ,  Market Analyst

Tucked in between this week's FOMC meeting, U.S Q2 GDP data, and earnings reports from U.S mega tech is the release of Australian Q2 inflation data.

 

Following a 2.1% rise in Q1, headline CPI is expected to rise by 1.8% in Q2, which would take the annual rate of inflation to 6.2%, its highest level since 2001 on the back of price rises in petrol, electricity, gas, food and new home construction costs.

 

Core inflation or the "trimmed mean" is expected to rise by 1.5%, taking the annual rate to 4.7%.

 

A firmer AU Q2 CPI number on Wednesday, followed by a hawkish Fed on Thursday morning, would raise the chances that the RBA opts for a larger rate hike of 65 or 75bp when the Board meets next Tuesday.

 

More so, as RBA communique last week brought a new hawkish element to the table, noting that "the current level of the cash rate is well below" the estimated neutral rate, thought to be "at least" 2.5%.

 

Currently, the interest rate market is 77% priced for a 65bp interest rate hike at next week's RBA Board meeting, which would take the cash rate to 2%. The interest rate market then expects another 140bp of rate hikes in 2022, taking the cash rate to 3.4% by year-end.

 

Turning to the ASX200, last week it gained 2.81%, for its best week since March, supported by a rebound on Wall Street and gains in tech and financial stocks.

 

The ASX200 is chipping away at the band of resistance 6750/6950. To negate the technical damage caused by the breakdown in June, a sustained break above 6950 is required.

 

Until this occurs, the rally from the 6407 low is viewed as a bear market countertrend rally.


ASX200 25th of July

Source Tradingview. The figures stated are as of July 25th ,2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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