Australian inflation accelerated to 3.5% annually in July, lifting bets for a Reserve Bank of Australia rate increase by early 2025.
The Australian Dollar (AUD) gained 0.2% to 0.7180 against the US Dollar (USD) after July’s Consumer Price Index (CPI) rose 1% month-on-month, exceeding the 0.8% forecast. Annual inflation reached 3.5%, down from June’s 3.8% but above estimates of 3.2%.
June’s CPI had declined 0.1% month-on-month, marking a shift in momentum. The data strengthened expectations for further RBA tightening, with markets pricing a 36% chance of a September hike, up from 17%, and a 94% probability by February 2025.
The AUD outperformed major peers, including the New Zealand Dollar, as traders adjusted positions on the back of the inflation surprise.