Oil Risks Meet a Critical Week for Inflation

• Markets begin the week balancing two competing themes: renewed uncertainty in the Middle East and a critical run of domestic economic data.
• Geopolitics remains front of mind after Iran delayed planned talks with the US and again raised the prospect of restricting access through the Strait of Hormuz. The developments are likely to keep upward pressure on oil prices and energy markets on alert.
• Domestically, attention shifts to May CPI, labour force and household spending data, all of which should provide a clearer read on the economy and the interest rate outlook.
• Economists expect trimmed mean CPI to rise 0.3% in May, while employment is forecast to increase by around 30,000 and the unemployment rate to edge down to 4.4%.
• Adding to the inflation story, the Government announced fuel excise relief will be partially retained from July, with motorists receiving a 16-cent per litre discount, half the level previously offered.