MUFG: AUD near-term setback after yesterday's CPI data, ahead of the RBA meeting next week

<p>Yesterday we had better-than-expected (headline) inflation data from Australia:</p><ul><li><a href="https://www.forexlive.com/news/forexlive-asia-pacific-fx-news-wrap-australian-inflation-surge-slows-a-little-20230628/" target="_blank" rel="follow" data-article-link="true">ForexLive Asia-Pacific FX news wrap: Australian inflation surge slows a little</a></li></ul><p>This trimmed back expectations for a rate hike from the Reserve Bank of Australia at their next meeting, coming up on July 4. Not everyone shares that assessment though:</p><ul><li><a href="https://www.forexlive.com/centralbank/anz-still-expect-a-rate-rise-from-the-rba-next-week-a-25bp-cash-rate-hike-20230628/" target="_blank" rel="follow" data-article-link="true">ANZ still expect a rate rise from the RBA next week, a +25bp cash rate hike</a></li></ul><p>MUFG note that Australian headline inflation slowed more than expected, dropping even further below the peak from the end of last year at 8.4%.
</p><p>And say that while the RBA will be pleased by the more significant drop in the headline rate, underlying details in the May month data were not as favourable. </p><ul><li>Core inflation measures have peaked but they remain too high. </li><li>The trimmed mean measure of core inflation slowed by 0.6ppt to an annual rate of 6.1% as it moved further below the peak from December at 7.2%. </li></ul><p>

MUFG are still expecting a further rate hike from the RTBA but say the Bank "could now choose to skip next week’s policy meeting and leave rates on hold until the following meeting in August".</p><p> And for AUD:</p><ul><li> Overall, it is a further near-term setback for the Australian Dollar which has been correcting lower since the middle of the month.</li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.