AUD Falters as Aussie Inflation Slows Below 4%

The Australian dollar has been falling against all G10 currencies following lower-than-expected inflation data in Australia, which delivered the Reserve Bank of Australia (RBA) its first fruits of months of aggressive interest rate hikes. The AUD/USD and AUD/NZD pairs both dropped by 0.3%.

The RBA had been aggressively hiking interest rates to combat rising inflation, but with the latest reading for June coming in below 4%, the bank's governor may be reconsidering its stance. Inflation slowed to 3.8% year-over-year (YoY) and 0.6% quarter-over-quarter (QoQ), missing the RBA's forecast.

The main dampening factor was a nearly 11% drop in fuel prices, which translated into disinflation in transport and goods. However, the housing sector weighed heavily on inflation, with new home construction costs jumping 5.8% YoY due to higher material and labor costs.