Economists at Commerzbank discuss Aussie’s outlook after Australian inflation surprised to the upside.

Inflation surprise in Australia

“Inflation data for April surprised to the upside at 6.8% (Bloomberg expectations: 6.4%). The price index excluding volatile goods fell somewhat, but was still at high levels at 6.5%. In this respect, an interest rate hike next week is probably not completely off the table, another surprise is quite conceivable. However, the AUD was not able to profit from the publications today.”

“Even if the probability of a rate hike is now seen somewhat higher on the market, the majority still expects a pause. Therefore, the inflation release could not support the AUD this morning.”

“At the same time, weaker purchasing managers' indices were published from China, which may have exerted downward pressure on the AUD.”