Upcoming CPI in Focus

• US–Iran negotiations appear to be moving closer to a ceasefire agreement, with both sides describing weekend talks as productive. While no final deal has been reached, hopes of progress pushed Brent and WTI down about 5%, leaving both back below US$100/bbl on expectations the Strait of Hormuz could soon reopen.

• US rates pricing remains tilted toward a small chance of hikes later this year as Kevin Warsh takes over as Fed Chair. His early emphasis on reinforcing Fed independence has been taken positively, while recent Fed commentary suggests the next statement could remove any remaining easing bias and shift toward a more neutral policy stance.

• Domestically, it is a quiet start to the week before April inflation data on Wednesday. Trimmed mean inflation is forecast at 0.4% m/m and 3.5% y/y. The print will be important for the RBA as it weighs sticky inflation against last week’s softer labour market data.

• For now, local hike expectations have been pared back, with markets pricing less than one full additional RBA hike this cycle. This week’s inflation data will be key in determining whether the RBA takes action in August.