CPI Takes Centre Stage

• RBA Governor Bullock struck a balanced tone, noting policy is already restrictive while leaving the door open to further tightening if inflation proves persistent. Markets interpreted the speech as slightly less hawkish, trimming expectations of another rate hike.
• Today’s Q2 CPI release is the key event for Australian markets. Consensus expects trimmed mean inflation of 0.9% q/q and 3.7% y/y, with the result likely to determine whether markets revert and rebuild expectations for another RBA hike.
• US-Iran tensions continue to ease, with diplomatic channels remaining open despite conflicting reports over formal negotiations. The reduced risk of a broader regional conflict has supported risk sentiment and eased inflation concerns.
• Brent crude fell another 5% to around US$84/bbl, extending this week’s sharp decline. Lower energy prices alonside easing tensions have helped drive the recent rally in global bond markets by further reducing near-term inflation pressures.
• US trade data showed demand continues to soften, with the goods trade deficit narrowing less than expected and the Atlanta Fed’s GDPNow estimate easing to 1.5%, supporting slowing growth expectations.