Australia's Inflation Holds Steady at 1.0% in Q2

Australia's Consumer Price Index (CPI) increased by 1.0% in the second quarter (Q2) of 2024, matching the growth rate from Q1, according to the Australian Bureau of Statistics. This result was in line with market expectations.

Annually, CPI inflation rose to 3.8% in Q2, up from 3.6% previously and meeting market predictions. The RBA Trimmed Mean CPI increased by 0.8% quarterly and 3.9% annually, slightly below market forecasts of 0.9% QoQ and 4.0% YoY.

Market Reaction and Analysis

Following the inflation data release, the AUD/USD pair fell by 0.66%, trading at 0.6495. The Australian Dollar hit a two-month low against the USD as traders anticipated upcoming monetary policy announcements from the Bank of Japan and the US Federal Reserve.

The Australian Dollar has been under pressure due to expectations of the Reserve Bank of Australia (RBA) potentially hiking rates. In June, the RBA kept its Cash Rate steady at 4.35% despite discussing a rate hike, citing concerns about inflation.

Outlook and Implications

The RBA is set to meet on August 6, making the CPI figures crucial for its policy decisions. If inflation exceeds expectations, it may bolster the case for a rate hike, potentially strengthening the AUD against major currencies. Conversely, softer CPI figures could increase the likelihood of a rate cut before year-end, putting the AUD under selling pressure.

Technical Analysis

Valeria Bednarik, FXStreet Chief Analyst, noted signs of bearish exhaustion in the AUD/USD pair, with no technical indications of a directional change. The pair continues to trade below key moving averages, with resistance around 0.6585. A rise above 0.6600 could trigger a bullish correction, while a drop below 0.6470 might push the pair towards the 0.6400/30 zone.