RBA Rate Hike Bets Rekindled as Oil Prices Retreat

Australia's 10-year government bond yield dropped by about 5% as oil prices retreated following a brief pause in US-Iran conflict. The US suspended its nearly two-week campaign of strikes against Iran, while Tehran said it had ended its retaliatory attacks and held talks with Oman over the Strait of Hormuz.

The yield remained near a two-month high due to persistent price pressures in Australia. The second-quarter CPI report is expected on Wednesday to show core inflation rose 0.9% in the quarter, lifting the annual rate to 3.7% from 3.5%. This reading would stay above the RBA's 2-3% target range, supporting bets that policymakers will maintain a tightening bias.

Markets currently imply a 40% chance the RBA will lift the 4.35% cash rate in August, with a move by November almost fully priced. The upcoming monetary policy meeting by the US Federal Reserve is also on focus, where rates are expected to be left on hold.