Market expectations for an RBA August rate hike collapse to 3-4% after Australia’s June CPI undershoots forecasts.
The AUD/JPY pair fell to 113.65 in early European trading, extending a weekly decline of 0.65%. The move follows softer-than-expected Australian inflation data, which reduced bets on an immediate Reserve Bank of Australia rate hike.
Australia’s annual headline CPI slowed to 3.8% in June from 4.0% in May, missing consensus estimates of 4.0%. The report prompted traders to slash August rate hike probabilities from 21% to just 3-4%.
Traders now shift focus to Friday’s Bank of Japan policy decision and Tokyo CPI data. The BoJ is expected to hold rates at 1.0%, though a hawkish outlook could further pressure the AUD/JPY cross.