AUD Underperforms After Softer August CPI Weighs on RBA Futures

The Australian Dollar has underperformed following a softer August Consumer Price Index (CPI) print, which weighed on Reserve Bank of Australia (RBA) cash rate futures. According to Elias Haddad at Brown Brothers Harriman, this weaker-than-expected inflation profile dampens expectations for further RBA tightening and leaves the AUD lagging its peers in the near term.

In August, headline CPI rose 0.4% (consensus: 0.5%) to be up 4.0% year-over-year (y/y), while trimmed mean CPI increased 0.2% month-over-month (m/m) to remain at 3.6% y/y for a third straight month.

This softer CPI print weighed on RBA cash rate futures, suggesting that the central bank may not need to tighten monetary policy as aggressively as previously thought. As a result, the AUD has underperformed against its peers in the near term.