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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Market alert: Australian dollar drops on soft CPI that takes the heat out of RBA meeting next week

The Australian dollar slipped after CPI came in lower than anticipated; a 6.1% headline CPI gives the RBA some breathing space for gradual rate rises and AUD and bond yields went south, but the ASX is steady in the aftermath.

Source: Bloomberg

The Australian dollar and domestic bond yields slid lower after CPI came in below expectations to ease pressure for rate hikes from the RBA.

Source: ABS

Going into the CPI number the Aussie had been oscillating around 0.6950 despite the US dollar strengthening against other major currencies ahead of the Federal Reserve meeting later today. The market is anticipating a 75- basis point hike from them.

For AUD/USD, the RBA is squarely in focus for their meeting next Tuesday 2nd August. The market is pricing in a 50- basis point hike, although the probability was lowered slightly after CPI.

The three and ten year Australian Commonwealth Government bond (ACGB) yields moved lower. At the time of going to print, the three-year is down 14 bp at 2.99%, while the ten year is 8 bp lower at 3.30%. The ASX 200 recovered earlier losses to be trading around 6800.

Today’s CPI number has given the RBA time to implement measured rate rises rather than a jumbo lift, such as the 100 bp seen by the Bank of Canada earlier this month.

The scope for the RBA to continuing to hike is supported by a very tight labour market and healthy trade figures. The June unemployment rate came in at 3.5% against 3.8% forecast and 3.9% previously. The latest trade surplus of AUD 15.96 billion for the month of May was a big beat on AUD 10.85 billion anticipated.

While the fight on inflation is clearly understood, the global growth outlook remains somewhat opaque. Global central banks raising rates, the Ukraine war and a sluggish outlook for the Chinese economy are all weighing on sentiment.

These risks were highlighted overnight with the International Monetary Fund (IMF) warning of slowing global growth.

Retails sales, PPI numbers and building approvals data will be released ahead of the RBA’s monetary policy meeting next Tuesday.

AUD/USD, three-year AU bond and ten-year AU bond

Source: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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