Australian Dollar: Cooling inflation but carry remains supportive – BBH
Brown Brothers Harriman’s (BBH) Elias Haddad expects Australia’s July Consumer Price Index (CPI) to ease, with headline and trimmed mean inflation drifting lower, in line with softer labor conditions and wage growth.
Australian Dollar (AUD) continues to benefit from steady inflation cooling, according to Brown Brothers Harriman (BBH) analyst Elias Haddad. July Consumer Price Index (CPI) is forecast to drop to 3.3% year-over-year, down from June’s 3.8%, while trimmed mean CPI is expected at 3.5% y/y versus June’s 3.6%. The Reserve Bank of Australia (RBA) will rely on August meeting minutes (Tuesday) and Q2 private capital expenditure data (Thursday) to provide further clues on the probability of another rate hike.
Futures markets still anticipate a 60% likelihood of one final 25 basis point increase by year-end, with the RBA maintaining a 4.60% cash rate. BBH notes that the risk landscape favors a prolonged pause due to the already restrictive monetary policy stance. However, Haddad highlights AUD’s advantageous carry and exposure to commodities, particularly in energy, AI, and defense sectors, as key drivers of the currency's upward momentum.
Meanwhile, global currencies such as GBP/USD and EUR/USD show mixed performances amid ongoing uncertainties surrounding US economic sanctions on Iran and evolving monetary policies.
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