April CPI data showed softer headline inflation but steady trimmed mean, reducing bets for a 25bps RBA hike by year-end.
AUD/USD dropped to near 0.7136 as mixed April inflation data reduced expectations for a Reserve Bank of Australia rate hike. The pair is expected to stabilize around 0.7000, aligned with Australia-US 2-year yield spreads.
Headline CPI fell to 4.2% year-over-year, below the 4.4% consensus, while trimmed mean CPI matched expectations at 3.4%. The RBA’s focus on underlying inflation leaves risks tilted toward a prolonged pause in tightening.
RBA cash rate futures trimmed bets for a 25bps hike by year-end, as the central bank projects below-potential GDP growth and a cash rate near neutral estimates.