AUD Weakens as Reduced Inflation Odds Hit August Rate Hike Chances

The Australian Dollar has weakened following weaker-than-expected inflation data for June. According to Commerzbank's Volkmar Baur, the lower than expected inflation rate of 3.8% has significantly reduced market-implied odds of an August RBA rate hike.

The Reserve Bank of Australia's next monetary policy meeting is just two weeks away, and signs are mounting that interest rates will remain unchanged in August. In June, prices unexpectedly fell by 0.1% month-over-month, while the consensus had expected a 0.2% increase.

Volkmar Baur notes that while services and non-tradable inflation remain elevated, he expects no further hikes this year, implying continued pressure on the Australian Dollar. The AUD has weakened as a result of the reduced odds of an interest rate hike.