Aussie tumbles sharply in Asian session after much weaker than expected inflation data. Headline CPI dropped -0.2% qoq in Q1 versus expectation of 0.2% qoq rise. Annually, CPI slowed to 1.3% yoy, down from 1.7% yoy and was sharply below expectation of 1.8% Yoy. The RBA trimmed mean CPI came in at 0.2% qoq, 1.7% yoy, below expectation of 0.5% qoq, 2.0% yoy. RBA weighted mean CPI rose 0.1% qoq, 1.7% yoy, also well below expectation of 0.5% qoq, 2.0% yoy. Markets react to the data by sharply increasing the pricing of the chance of a rate cut by RBA in May. Cash rate futures are around pricing in around 50% odds of a 25 bps cut, comparing to around 13% odds of cut prior to the data. Technically, it should be noted that last week's high of 0.7833 in AUD/USD was close to an important medium term fibonacci level. And, today's breach of 0.7630 support is taken as a sign of trend reversal.
Released elsewhere, New Zealand trade surplus narrowed to NZD 117m in March, below expectation of NZD 405m. Japan all industry activity index dropped -1.2% mom in February, slightly better than expectation of -1.3% mom. German Gfk consumer sentiment rose to 9.7 in May versus expectation of 0.5. Swiss UBS consumption indicator dropped to 1.51 in March. UK GDP will be the main focus in European session and index of services, CBI reported sales will also be featured. Eurozone will release M3 money supply. US will release trade balance and pending home sales in early US session.
But the main focus will be on FOMC rate decision. Fed is widely expected to kept policies unchanged but the accompanying statement will certainly be scrutinized for clues about June hike. A key is the voting and whether Kansas City Fed president Esther George would be joined by others to vote for a hike this time. There are speculations those might include Cleveland Fed president Loretta Mester and St. Louis Fed president James Bullard. Also, attention will also be on Fed's view over balance of risks, in particular, growth outlook as affected by global developments. Besides, Fed's view on inflation outlook would be watched for any updates on recent jump in oil prices.