Australia CPI could boost Aussie if inflation arrives above 4%
- Australian Consumer Price Index seen steady at 4% YoY in June.
- The Trimmed Mean CPI will impact the next Reserve Bank of Australia interest rate decision.
- The Australian Dollar trades with a neutral stance against its American rival.
The Australian Bureau of Statistics (ABS) will publish the June Consumer Price Index (CPI) on Wednesday at 01:30 GMT. The report is expected to show that inflation rose 4% from a year earlier, matching the May reading. The monthly CPI is foreseen at 0.2% following the -0.7% print from May.
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 3.7%, higher than the previous reading of 3.6%, while on a monthly basis the Trimmed Mean CPI is also forecast to remain unchanged at 0.4%.
Ahead of the announcement, the Australian Dollar (AUD) hovers around 0.6950 vs the US Dollar (USD), with the latter strengthening on demand for safety.
What to expect from Australia’s inflation rate data?
Inflation data is a critical factor in the RBA’s monetary policy decisions, and according to Governor Michele Bullock, “it is still too high.”
The RBA met in June, and the Board decided to leave the cash rate target unchanged at 4.35%, after hiking rates three times so far in 2026. The accompanying statement showed that policymakers acknowledged that disruption to global Oil supply is having an impact on inflation, and that the latter picked up “materially” in the second half of 2025 — that is, before the current Middle East war.
Geopolitical tensions escalated in mid-July and eased by the end of the month, yet the crisis remains. Transit through the Strait of Hormuz is limited after the United States (US) and Iran exchanged attacks over the last two weeks. While crossfire has paused, the critical sea strait is closed to most traffic. Oil prices are off their monthly peaks, but a barrel of West Texas Intermediate (WTI) trades at around $80, while the barrel of Brent changes hands at $84, maintaining speculative interest in cautious mode.
Confidence has also been eroded ahead of the Australian CPI amid a sharp decline in global stocks. Once again, concerns revolved around potential returns from massive AI investment.
No peace progress in the Middle East is the main inflationary factor these days, and there’s little central banks can do. The RBA understands a tighter monetary policy this year has helped slow consumption spending, but also that uncertainty about the outlook remains high, and that, even if the war ends in the near term, something quite unlikely, global supply issues will take some time to resolve, hence maintaining upward pressure on global energy prices and inflation.
Additionally, the US Federal Reserve (Fed) is scheduled to announce its decision on monetary policy later on Wednesday. The Fed is widely anticipated to keep interest rates on hold at 3.75%, although Chair Kevin Warsh is expected to retain a certain hawkish tone. Warsh has made a point against forward guidance, yet market players will still be looking for clues about what the central bank may do when it meets again in September.
How could the Consumer Price Index report affect AUD/USD?
Annual Australian CPI peaked at 4.6% YoY in March and eased toward 4% in May. Given that the war paused in June, most major economies reported lower-than-anticipated inflation in the month, and that should be the case in Australia.
A reading in line with expectations and the previous 4% should have no material impact on the AUD/USD pair. Anything above that level should boost speculation for additional rate hikes, resulting in a stronger Aussie, at least in the near-term.
On the contrary, a softer-than-anticipated outcome, and especially given AUD/USD's current bearish tone, should push the pair sharply lower in the near term, as the focus quickly returns to war-related headlines and the upcoming Fed announcement.
Valeria Bednarik, FXStreet Chief Analyst, notes: “From a technical point of view, the AUD/USD is neutral. For the last two weeks, the pair has been confined to a tight range, finding buyers around 0.6950 and quickly retreating on spikes beyond the 0.7000 figure. The daily chart reflects the ongoing absence of directional strength, as the pair barely holds above a mildly bullish 20-day Simple Moving Average (SMA) currently near the base of the aforementioned range. The 100-day SMA lies flat in the 0.7050 region, while the 200-day SMA grinds marginally higher around 0.6900. Technical indicators, in the meantime, turned marginally lower around their midlines, failing to provide clear directional clues.”
Bednarik adds: “The AUD/USD pair would need to clear the 0.7030 region to be able to extend its run toward the 0.7070 price zone. Once beyond the latter, next resistance lies at the 0.7100 figure. Support can be found at 0.6950 and 0.6900, with a break below the latter opening the door for a steeper decline.”
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.
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 Jul 29, 2026 01:30
Frequency: Monthly
Consensus: -
Previous: 3.6%
Source: Australian Bureau of Statistics
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