Australian Markets Turn to CPI

• Oil prices retreated below US$100/bbl after no further escalation emerged in the Middle East and reports suggested diplomatic efforts to revive US-Iran talks. Markets have pared some geopolitical risk premium, although supply risks remain elevated following attacks on Saudi oil infrastructure.
• Australian bond yields finished higher in cash markets last week, with the 3-year at 4.72% and the 10-year at 5.09%, as stronger-than-expected employment data reinforced expectations for further RBA tightening. Futures point to a firmer start after global sovereign yields declined on Friday.
• The US lifted tariffs on Australian exports to 12.5% from 10%, although beef and gold remain exempt. The move reinforces an increasingly protectionist global trade backdrop.
• Australian rate markets continue to price one additional RBA hike by year-end, with August tightening odds sitting around 37% following last week’s employment report.
• Attention turns to Governor Bullock on Tuesday and Q2 CPI on Wednesday, with inflation expected to be the key driver of near-term RBA pricing. A stronger-than-expected result would likely see markets further build expectations for another hike.