In August, there was a notable acceleration in the inflation rate in Australia, reaching 5.2%.

The annual inflation rate in Australia experienced an acceleration in the month of August.

Investors showed keen interest in the Australian inflation figures for August as they anticipate that the Reserve Bank of Australia (RBA) will maintain higher interest rates in order to manage inflation. The acceleration in inflationary pressures would reinforce a more hawkish outlook on the RBA's interest rate trajectory.

The annual inflation rate in Australia increased from 4.90% to 5.20% in August, in line with economists' forecast of 5.2%. The Australian Bureau of Statistics (ABS) reported that housing prices (+6.6%), transport prices (+7.4%), food and non-alcoholic beverages prices (+4.4%), and insurance and financial services prices (+8.8%) were the main contributors to inflation. However, the annual inflation rate for food and non-alcoholic beverages eased from 5.6% in July.

While housing prices softened in August (7.3% in July), prices for transport (0.3% in July) and insurance & financial services (8.5% in July) increased. Excluding volatile items and holiday travel, the monthly CPI indicator rose by 5.5% in August, slightly lower than the 5.8% increase in July. These latest inflation figures align with expectations of a prolonged period of higher interest rates.

In addition to Australian inflation, investors were also keeping an eye on industrial profit numbers from China. In August, industrial profits declined by 11.7% year-on-year (YTD), compared to a 15.5% decline in July. Although the figures were weaker than economists' forecast of a 10.0% fall, there has been a gradual recovery in China's industrial profits in recent months.  

Australian Inflation Data: Impact on AUD to USD Exchange Rate

Prior to the release of the economic indicators, the AUD/USD exchange rate declined to a minimum of $0.63867, but then rebounded to reach a pre-statistics peak of $0.64074.

Following the announcement of the economic indicators, the AUD/USD exchange rate climbed to a peak of $0.64086 before subsequently dropping to a low of $0.63974.

As of this morning, the AUD/USD exchange rate saw a 0.02% increase, settling at $0.63978.  

Upcoming Events to Watch

Later today, the focus will be on the release of durable and core durable goods orders. If the figures exceed expectations, it would strengthen the possibility of the Federal Reserve adopting a more hawkish stance on interest rates.

Economists are anticipating a 0.1% increase in core durable goods orders for the month of August. In July, core durable goods orders had increased by 0.5%.

While the economic indicators will garner attention, investors also need to take into account the speeches by members of the Federal Open Market Committee (FOMC). Any dovish comments regarding monetary policy could come as a surprise to the markets.