Softer headline CPI readings contrast with a rise in Trimmed Mean CPI, leaving traders cautious on RBA policy outlook.
The AUD/USD pair recovered modestly to around 0.6920-0.6925 after Australia’s May CPI data showed mixed signals. Headline inflation eased to 4% YoY from 4.2%, while the monthly CPI fell 0.7%, exceeding expectations. However, the Trimmed Mean CPI rose 0.4% month-on-month and accelerated to 3.6% YoY from 3.4%.
The softer headline figures initially supported a brief rebound, but the rise in core inflation tempered expectations for an RBA rate cut. Markets now see the central bank maintaining steady rates, with the USD’s strength further limiting the AUD’s upside. The USD Index (DXY) hit a fresh high since May 2025 amid growing bets on a Fed rate hike.