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17 May 2013
Flash: The fall in inflation in recent months has become central - ANZ
The US CPI which was released today came in at 1.1 vs. 1.3 estimates, and some analysts are quick to point out this is occurrence is now a global dilemma which could have an interesting impact on the foreign exchange market.
The US CPI which was released today came in at 1.1 vs. 1.3 estimates, and some analysts are quick to point out this is occurrence is now a global dilemma which could have an interesting impact on the foreign exchange market.
According to analysts at ANZ, “The fall in inflation in recent months has become central. We have seen downside inflation surprises from the US, EU, China, Australia, the Philippines and Taiwan, among others. Our China Commodity Index, which foreshadowed the fall in the China CPI, has been negative in %y/y terms since the beginning of 2012.”
They went on to comment,” It has taken us some time to determine what this inflation dynamic meant for currencies. One obvious conclusion from much lower global inflation is that central banks would keep policy easy for longer. But again, this doesn’t fit with the recent discussion on the Fed; though of course it does fit with the price action in equities. At the very least it does suggest that those currencies struggling with high inflation will see some reprieve, and those benefitting from stronger commodity prices will lose support. That suggests favouring INR and IDR, at the margin, over AUD and NZD (we are currently long USD/IDR). “
The US CPI which was released today came in at 1.1 vs. 1.3 estimates, and some analysts are quick to point out this is occurrence is now a global dilemma which could have an interesting impact on the foreign exchange market.
According to analysts at ANZ, “The fall in inflation in recent months has become central. We have seen downside inflation surprises from the US, EU, China, Australia, the Philippines and Taiwan, among others. Our China Commodity Index, which foreshadowed the fall in the China CPI, has been negative in %y/y terms since the beginning of 2012.”
They went on to comment,” It has taken us some time to determine what this inflation dynamic meant for currencies. One obvious conclusion from much lower global inflation is that central banks would keep policy easy for longer. But again, this doesn’t fit with the recent discussion on the Fed; though of course it does fit with the price action in equities. At the very least it does suggest that those currencies struggling with high inflation will see some reprieve, and those benefitting from stronger commodity prices will lose support. That suggests favouring INR and IDR, at the margin, over AUD and NZD (we are currently long USD/IDR). “