Australian Dollar Suffers as Softer Inflation Figures Reduce Rate Hike Bets

The Australian dollar weakened against major currencies after Australia's Q2 Consumer Price Index (CPI) report revealed softer inflation figures than expected.

According to the data, trimmed mean inflation slowed to 3.6% year-over-year, while headline CPI eased to 3.8% from 4.0%. Housing remained the largest contributor to annual inflation, and transport inflation eased sharply following lower fuel prices.

The softer inflation figures reduced the likelihood of another interest rate hike by the Reserve Bank of Australia (RBA) this cycle. The RBA has a hawkish bias, but with inflation moving in the correct direction, policymakers are likely to retain their restrictive monetary policy stance without needing to raise rates in August.