Traders price in lower odds of an August rate increase after RBA remarks cast doubt on tightening necessity ahead of key CPI data.
The Australian dollar fell 0.25% to trade just under 0.7000 on Tuesday, extending a five-week streak of resistance at that level. The decline followed a speech by Reserve Bank of Australia Governor Michele Bullock, which traders interpreted as signaling hesitation on further rate hikes despite persistent inflation concerns.
Bullock noted underlying inflation remains elevated and could rise further due to energy costs, while demand continues to outpace supply. However, the speech’s framing—posing whether this year’s three hikes may have already sufficed—undermined expectations for an August move. Markets had previously priced in a higher probability of tightening at the 11 August meeting.
The shift in sentiment precedes Wednesday’s second-quarter Consumer Price Index release at 01:30 GMT. Consensus forecasts headline inflation at 0.2% month-on-month, down from -0.7% prior, with the annual rate steady at 4%. The trimmed mean is expected at 0.4% MoM.