Australia’s Q1 inflation well below target and expectation, weakening AUD; BoJ updated the GDP forecat and adjusted the core inflation upward

• Australia’s inflation missed forecast as Government program cut costs
• Bank of Japan updated GDP forecasts, slightly weakening JPY
• US consumer confidence soars to 14-month high

Australia has published its Q1 inflation data just hours ago with less than expected figures. Headline inflation was 0.6% QoQ and 1.1% YoY in Q1, with expectations at 0.9% and 1.4% respectively. The trimmed mean core inflation was at 0.3% QoQ, with expectation at 0.5% and previously at 0.4%. All metrics have shown decreases to various degrees from previous releases. The RBA target for core inflation is 2~3%, so these figures are well below the lower band. This is primarily due to government’s cutting costs on public programs. AUD fell 0.4% after the release potentially because the market is expecting sustained dovish stance from the central bank.

Bank of Japan updated its GDP forecasts for 2021 and 2022 on Tuesday, raising the core consumer inflation to 0.1%, lower than its previous forecast at 0.5% made back in January. Meanwhile, BoJ kept its monetary policy unchanged, in line with market expectations. Short-term interest rates are around -0.1% and 10-year bond yields around 0%. The update has slightly weakened JPY over half a percent overnight, and USDJPY currently trades at 108.87, up about 0.17%. Japan’s economy has been in focus recently as Tokyo has less than 100 days before the opening of the 2021 Olympics. Doubts are still around regarding whether or not the event could be carried out in a safe fashion.

US consumer confidence jumped to its 14-month high in April as the economy recovers and vaccination goes smoothly. The survey is based on consumers’ assessment on current business and labor market conditions. Last month the reading was at 110.1 and this month it lands at 139.6. Regarding the vaccination, the US has expanded the eligibility to all adults, with half of the population has had at least one dose and third of the adults have been fully vaccinated. Economists believe that the US economy in 2021Q2 will continue to show robust growth. Some also suggest that, growth this year is likely to be the best in nearly four decades.