RBA Rate Hike Debate Reignited by Hot Australian Inflation Data

The Australian Dollar is facing increased pressure as hot inflation data threatens to reignite debate around Reserve Bank of Australia (RBA) rate hikes. Strategists at TD Securities project a rise in the RBA's preferred trimmed mean core CPI measure to 0.9% QoQ in Q2, accelerating from 0.8% in Q1 and pushing annual core inflation to 3.7%. Headline inflation for June is expected to print at 4.2% YoY, outpacing the market consensus of 4.0%. Housing components like rents and new dwelling purchases are posing persistent upside pressure.

A recent pullback in global tech stocks has sapped risk appetite, sending the high-beta currency lower. RBA Governor Michele Bullock's cautious rhetoric has tempered expectations for an immediate policy move, leaving markets focused on a potential hike later in the year. The AUD/USD daily chart shows the Australian Dollar experiencing a drop.

TD Securities expects sticky core inflation and housing cost pressures to keep the RBA on high alert, leaving the door open for additional rate hikes if upcoming CPI data surprises to the upside. MUFG emphasizes that while the Aussie maintains strong year-to-date backing, near-term upside will remain restrained by global tech corrections and the RBA's measured approach.