AUD Tumbles Below $0.695 on Softer Inflation Data

The Australian dollar plummeted below $0.695, hitting its weakest level in two weeks due to softer inflation data that dampened expectations of additional interest rate hikes.

Headline inflation unexpectedly eased to a four-month low of 3.8% in June from both May's reading and forecasts of 4.0%, while monthly consumer prices fell 0.1% for the second straight month.

The closely watched trimmed mean inflation rate rose 3.6% annually, below expectations of 3.7%, while quarterly core inflation increased 0.8%, also undershooting forecasts.

Markets sharply scaled back bets on another rate hike this year to around 50% from more than 90% before the release, indicating a reduced likelihood of further tightening at the central bank's August 11 meeting.

Although inflation remains above the Reserve Bank of Australia's (RBA) target range of 2%, 3%, the softer readings reinforced the view that the RBA is unlikely to resume policy tightening at its upcoming meeting, despite Governor Philip Lowe's recent warning that another rate hike may still be needed to bring inflation back to target.