Australia CPI expected to show inflation easing in July
- Australian Consumer Price Index seen easing in July.
- The Reserve Bank of Australia will focus on the Trimmed Mean CPI.
- The Australian Dollar aims to extend its latest rally vs the Greenback.
The Australian Bureau of Statistics (ABS) will publish the July Consumer Price Index (CPI) on Wednesday at 01:30 GMT. The report is expected to show that inflation rose 3.2% from a year earlier, easing from the 3.8% posted in June. The monthly CPI, however, is forecast at 0.8% following the -0.1% print from the previous month.
The ABS will also release the Trimmed Mean CPI, the Reserve Bank of Australia’s (RBA) favorite inflation gauge. The annual figure is expected to print at 3.5%, slightly lower than the previous 3.6%, while the monthly Trimmed Mean CPI is forecast to remain unchanged at 0.3%.
Ahead of the announcement, the Australian Dollar (AUD) trades a handful of pips below a multi-month high of 0.7180 against the US Dollar (USD), as the latter weakens amid geopolitical turmoil.
What to expect from Australia’s inflation rate data?
Inflation data is a critical factor in the RBA’s monetary policy decisions and is also related to geopolitical turmoil: the war in the Middle East is, no doubt, the primary source of mounting price pressures across the globe. And it is out of the RBA’s control.
“Members noted that higher energy prices and strong demand for goods used to develop AI services were adding to inflationary pressures in some economies. While core measures of consumer price inflation had not yet risen significantly following the onset of the Middle East conflict, members discussed the potential for these and other global developments to generate a more pronounced inflationary impulse. If so, this could push up Australian import prices and, in turn, consumer prices,” the minutes of the August monetary policy decision state.
Members also noted that inflation in Australia remained well above target, even after easing unexpectedly in year-ended terms in the June quarter, and expected trimmed mean inflation to remain above 3% until mid-2027.
The Board decided to leave the Official Cash Rate (OCR) unchanged at 4.35% after debating whether a fourth rate hike this year was necessary.
With that in mind, the upcoming inflation data would shape the market’s view on the upcoming monetary policy decision, and the Aussie will move in consequence. Annual Australian CPI peaked at 4.6% YoY in March. The anticipated reading of 3.2% should cool hopes of additional interest rate hikes in the near future, negatively affecting the Aussie.
A reading between the expected 3.2% and the previous 3.8% would be worrisome and raise the odds of additional hikes, while a reading above 3.8% would trigger panic. Market players will rush to bet on rate hikes and temporarily push the AUD higher, yet once the dust settles, the discouraging figure should play against the Australian currency.
Additionally, it is worth noting that, in the near term, Oil prices are retreating amid fresh hopes the US and Iran could resume negotiations. Market players are taking the headlines with a pinch of salt, but some relief is clear across financial boards.
How could the Consumer Price Index report affect AUD/USD?
As previously mentioned, inflation is expected to have eased further in July and approach the RBA’s range goal of 2% to 3%. Such a reading should have a limited, yet negative impact on the AUD. Ahead of the announcement, the AUD/USD pair hovers around 0.7150.
Valeria Bednarik, FXStreet Chief Analyst, notes: “From a technical point of view, the AUD/USD is bullish, although losing momentum. Still, technical readings in the daily chart suggest that buyers hold the grip despite the ongoing pause. The pair develops above all bullish moving averages, with the 20-day Simple Moving Average (SMA) about to cross above the 100-day SMA, both around 0.7070, providing a solid base and hinting at higher highs ahead. The same chart shows, however, technical indicators lack directional strength while holding well into positive territory.”
Bednarik adds: “The AUD/USD pair should take the 0.7080 peak to accelerate north, in which case, the next relevant level to watch is the 0.7130 price zone. Near-term support lies at 0.7135, ahead of the firmer one mentioned above around 0.7070. Should the latter give up, speculative interest could push the pair towards 0.7000 before buyers attempt to retake control.”
Economic Indicator
Trimmed Mean CPI (YoY)
The Trimmed Mean Consumer Price Index (CPI), released by the Australian Bureau of Statistics on a monthly basis, is a measure of underlying inflation. The Trimmed mean is calculated using a weighted average of percentage change from the middle 70% of the distribution of all CPI components in order to smooth the data from the more-volatile items. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.
Read more.Next release: Wed Aug 26, 2026 01:30
Frequency: Monthly
Consensus: 3.5%
Previous: 3.6%
Source: Australian Bureau of Statistics
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
추천 기사
