Australian dollar under pressure, CPI expected to ease

[Redator]

The Australian dollar is down for a fourth straight day. In the European session, AUD/USD is trading at 0.6497, down 0.36% on the day. The Aussie has slipped 1.5% in the current slide, as the US dollar continues to make inroads against most of the major currencies.

Australian CPI expected to ease to 2.2%

Australia's inflation rate has been falling and that trend is to continue in the second quarter report, which will be released on Wednesday. CPI is expected to ease to 2.2% y/y, down from 2.4% in Q1, which was the lowest level since Q1 2021. Quarterly, CPI is expected to tick lower to 0.8% in Q2, down from 0.9% in Q1.

The markets will be keeping a close eye on services inflation, which has been persistently well above the Reserve Bank of Australia's 2%-3% target. In the first-quarter report, services inflation fell to 3.7%, down sharply from 4.3% in Q4 2024.

Underlying inflation has also declined. The trimmed mean, the RBA's key gauge of core CPI, dropped to 2.9% y/y Q1, down from 3.2% in Q4 2020, which was the lowest level since Q4 2021.

If inflation eased in Q2, it will likely cement a rate cut at the next meeting on Aug. 12. The RBA is looking to lower rates, which will help growth and ease the inflation squeeze on consumers.

The RBA shocked the markets earlier this month when it maintained rates, as the markets had widely expected a quarter-point trim. The money markets have priced in a rate cut at the Aug. 12 meeting at around 87% and it's very unlikely that the Reserve Bank will blindside the markets at two straight meetings, which would hurt the central bank's credibility.

AUD/USD Technical

• AUD/USD has pushed below support at 0.6514 and is testing 0.6500. Below, there is support at 0.6484
• There is resistance at 0.6530 and 0.6544

AUDUSD 4-Hour-Chart, July 29, 2025

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