FX.co ★ Aussie Dollar Dips on Softer CPI Data

The Australian dollar slipped to around $0.71, pulling back from a one-week high as investors parsed the latest inflation figures for clues on the interest rate outlook. Headline inflation slowed more than expected, easing to 4.2% year-on-year in April from 4.6% previously and falling short of the 4.4% consensus forecast. On a monthly basis, CPI decelerated sharply to 0.4% from 1.1%, adding to evidence of moderating price pressures.

However, underlying inflation remained persistent. The trimmed mean CPI rose 3.4% from a year earlier, matching expectations but staying above the Reserve Bank of Australia’s 2–3% target band. The mixed data support a cautious policy stance, with core inflation still elevated even as headline inflation cools.

Markets interpreted the release as broadly consistent with the RBA holding rates steady at its June 15–16 meeting. Nonetheless, the possibility of further tightening has not been ruled out: interest rate swaps now imply roughly even odds of an August hike, down from about 64% prior to the data.