Australia is set to release its July inflation data, with consensus expectations pointing to a slowdown in headline CPI from 3.8% to 3.3% and a modest easing in the trimmed mean from 3.6% to 3.5% [1]. ING’s Francesco Pesole argues that such outcomes would support the view that the Reserve Bank of Australia (RBA) will not implement further rate hikes this year, as inflation continues to moderate [1]. Despite this, RBA Governor Michele Bullock is expected to maintain a hawkish stance, and even a minor inflation surprise could provide near-term support for the Australian Dollar (AUD) by narrowing the gap between market pricing and the RBA’s rhetoric [1].
Currently, markets are pricing only a 50% probability of an RBA rate hike by year-end, reflecting skepticism about further tightening despite Bullock’s hawkish tone [1]. ING remains constructive on AUD/USD, noting that their 0.72 end-3Q target has nearly been reached ahead of schedule. They see strong fundamentals and attractive carry as supportive factors for a move above the May 0.7260-0.7270 highs before year-end [1].
No specific market reactions or analyst opinions beyond ING’s outlook are provided in the article [1].
CONCLUSION
Australia’s July inflation data is expected to reinforce the RBA’s hold bias, with ING forecasting no further rate hikes this year. However, a surprise in the data could boost the AUD, and ING remains positive on AUD/USD’s prospects for the remainder of the year.