AUD Set for Headwinds from Extended Interest Rate Pause

According to Brown Brothers Harriman's (BBH) Elias Haddad, above-target Australian inflation will keep Reserve Bank of Australia (RBA) hike risks alive. The June and Q2 Consumer Price Index (CPI) are expected to show firm trimmed mean readings.

Inflation data is crucial for the RBA, with headlining CPI expected at 4.0% y/y for a second straight month while trimmed mean CPI is expected at 3.7% y/y vs. 3.6% in May.

However, Haddad judges risks skewed toward an extended pause given sub-potential growth and a cash rate near the top of neutral estimates. This is seen as a headwind for the Australian Dollar (AUD).