Stronger Household Spending

• Risk sentiment improved overnight on reports of progress in the Strait of Hormuz, with oil dropping 6% to trade below $80/bbl.
• As such, bond yields shifted lower on reduced near term inflation risk, and markets have slightly reduced the chance of short term Fed hikes, though one remains fully priced by December.
• Domestically, the monthly household spending indicator surprised to the upside in June, rising 0.8% to be 6% higher over the year. Strength was led by transport, particularly motor vehicles and air travel, though these are typically noisier components and warrant some caution.
• The data reinforces the consensus that the RBA will remain on hold next month, though resilient household finances pose an upside risk and could build the case for tighter policy.