Australian Dollar: CPI keeps RBA on hold bias – ING
ING’s Francesco Pesole expects Australia’s July inflation data to show further moderation, consistent with no additional Reserve Bank of Australia hikes this year. He argues Governor Bullock is likely to stay hawkish, and even a small inflation surprise could lift AUD.
ING's Francesco Pesole anticipates the July inflation data from Australia will display additional moderation, suggesting no further Reserve Bank of Australia hikes this year. Governor Bullock is expected to maintain a hawkish stance, and a minor inflation surprise might strengthen the AUD. ING maintains a constructive outlook on AUD/USD, targeting a rise above the May 0.7260-0.7270 highs before the year's end.
Australia's July inflation data is released at 02:30 BST tomorrow, with expectations of a slower headline CPI from 3.8% to 3.3%, though the trimmed mean is likely to receive more focus. The outcome would still align with the view of no further RBA hikes this year as inflation persists in moderating. However, it is unlikely to prompt a more dovish tone from Governor Michele Bullock.
Bullock has demonstrated notable hawkishness, yet market pricing still indicates only a 50% probability of a hike by the year's end. Even a slight inflation surprise could narrow the gap between market expectations and Bullock's statements, offering short-term support for the AUD. ING remains optimistic about AUD/USD, with their 0.72 end-3Q target almost achieved sooner than anticipated, making a move above the May 0.7260-0.7270 highs before the year's end an appealing prospect.
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