AUD Weakened as RBA Rate Hike Odds Plummet Amid Lower Inflation

Australia's inflation data has come in lower than expected, which Commerzbank's Volkmar Baur believes will reduce market-implied odds of an August Reserve Bank of Australia (RBA) rate hike and put pressure on the Australian Dollar. The AUD weakened after the release, with market-implied odds of a rate hike falling to 4% from over 20%. This is because the RBA's next monetary policy meeting is just two weeks away.

The June inflation data showed prices fell by 0.1% month-over-month, lower than the expected 0.2% increase. As a result, the year-over-year rate dropped to 3.8%, its lowest level in four months. Baur notes that while services and non-tradable inflation remain elevated, he expects rates to stay unchanged in August and sees no further hikes this year.