RBA Pricing Unwind Accelerates as Australia's Inflation Report Shows Modest Undershoot

The August inflation report from Australia showed a modest undershoot in both headline and trimmed mean inflation. The latter is the preferred measure of underlying price pressures by the Reserve Bank of Australia (RBA). The annual rate of trimmed mean inflation came in at 3.6%, unchanged from July, but the monthly trimmed mean increase was 0.24%.

This development has accelerated the unwind in hawkish RBA pricing, sending implied probabilities for a 25 basis point hike at the next meeting on November 3 to 20%, down from 44% last week.

The AUD/USD pair is testing its lowest level since late July, with the price now at 0.6964 and facing key support. The ASX 200 index, however, has broken higher, benefiting from the unwind in hawkish rate pricing.