The Australian dollar had fluctuated at 0.6950 heading in the CPI report, notwithstanding the US dollar rising against other major currencies before the Federal Reserve meeting on July 27. The market is expecting them to raise interest rates by 75 basis points.
For their meeting on August 2, the RBA will be a key topic for the AUD/USD. A 50 basis point increase is anticipated by the market, albeit the probability was significantly reduced as the CPI came in.
The yields on the Australian Commonwealth Government bonds (ACGB) of three and ten years decreased. The 10-year is 8 basis points less at 3.30%, whereas the 3-year is down 14 basis points at 2.99%. Prior losses were made up, and 6800 is where the ASX 200 is currently changing hands.
The RBA now has the opportunity to undertake gradual rate increases instead of a large increase, like the 100 basis points witnessed by the Bank of Canada earlier in July. This is thanks to the CPI statistic released on July 27.
A highly tight labor market and positive trade data strengthen the possibility of the RBA resuming to raise rates. In June, the unemployment rate was 3.5%, as opposed to the forecasted 3.8% and the preceding reading of 3.9%. The most recent trade surplus for May came in at AUD 15.96 billion, significantly exceeding the AUD 10.85 billion forecast.
Although the fight against inflation is well acknowledged, the forecast for global growth is still not entirely apparent. The Ukraine conflict, global central banks hiking interest rates, and a gloomy forecast for China’s economy are all impacting sentiment of the market.
When the International Monetary Fund (IMF) warned about slowing global growth, these concerns came to light immediately.
Before the RBA’s monetary policy meeting on August 2, figures on retail sales, PPI figures, and construction permits will be made public.