RBA rate rise forecasts pushed back after softer inflation numbers

Good morning

I was out walking the dog this morning.  I’d set off a little earlier than usual to avoid the heat, obviously more for the dog’s sake than mine.  When I left the house it was the sort of temperature in which you’d be happy sitting outdoors.  By the time I got back it was already getting uncomfortable.  The heatwave has been well publicised, we’re getting to the mid 30’s today.  If we take say 27°c as a great, warm but no overbearing temperature, 35°c is 30% warmer.

Les hot was England’s performance against Ghana yesterday evening.  It wasn’t that it was bad, and all credit to Ghana who played their game nigh on perfectly.  But it highlighted my issue with England that while we have a team of very decent players, we lack anyone that stands out above the rest, someone capable of creating a spark of excellence.  I’m think Gascoigne, that sort of flair player.  Still England are not the first of the big teams to fail to win.  Brazil, Portugal, Belgium and Spain have all drawn group matches so we’re not in bad company.  England got lucky with a couple of decisions including what looked to me like a pretty good case for Ghanian penalty.  But we’ll take the point and look forward to Panama at the weekend.

To currencies, and the US dollar has had a bit of a push higher with GBPUSD currently 1.3195 and EURUSD at its lowest levels since June 2025 at 1.1355.  This EUR weakness took GBPEUR up through 1.165, now 1.1615, very close to highs not seen since July 2025. 

Aussie CPI inflation headline was softer than expected overnight, although the trimmed mean was just above forecast.  Trimmed mean is what Fed’s Warsh has talked about but I’d imagine he’d only prefer that measure if it put inflation lower.  The lower Aussie reading which followed a surprise to the downside in the same reading last month, has led some banks to push back their forecast for an RBA rate rise until much later in the year.  AUD has lost ground to the US dollar, now 0.6900, the lowest its been since early April.  GBPAUD is at recent highs around 1.9115 but AUD is looking strong against a struggling NZD< with AUDNZD hitting the mid-1.22’s having been below 1.20 just a month or so ago.  GBPNZD now 2.3340, almost 10 big figures above the June lows. 

Meanwhile, US/Iran peace talks continue with Iran, it still isn’t really clear what’s going on there.  Trump insists Iran have agreed to various nuclear inspections although Iran haven’t confirmed that at all.  Still, with UAE oil exports running at some 85% of pre-war levels, it is no surprise that oil prices are continuing to fall, now less than $5 from pre-war levels. On the subject of war, Russia are pressuring Belarus to open a new front in Ukraine.  This follows news that Russia have started to gain strategic footholds in the Donbas region.  Putin is perhaps looking to pile pressure on Ukraine who will likely need EU, and hopefully US support, to keep the Russians from making too much headway. 

Several central bank speakers on the calendar today including BoEs Dhingra later in the London session.  She has previously been regarded as dovish and it could be interesting to see whether she has really turned neutral, as per her voting at the last BoE rate meeting, or whether she still has concerns about the economy and sees rate cuts as necessary despite recent energy-led inflation.

Aussie employment numbers overnight, last month they surprised to the downside, coinciding with two months of lower than expected Aussie CPI numbers.  A softer reading overnight will really put RBA on the back foot when it comes to rate rises and further AUD losses could well be seen, although perhaps that won’t be reflected in AUDNZD. 

Have a great day…

-  09.00 German IFO

-  10.00 ECBs Nagel speaks

-  12.20 BoEs Breeden speaks

-  14.00 SNB quarterly bulletin

-  14.35 ECBs Cipollone speaks

-  15.00 US new home sales

-  16.00 BoEs Dhingra speaks

-  02.30 AUS employment