EURUSD, AUDUSD, Gold - AU CPI HIGHER BUT BEARISH AUD

Headline inflation accelerates to 5.2%; Still expect another RBA hike alongside elevated services inflation.

Australia saw a 0.58% month-on-month increase in its Consumer Price Index (CPI) for August. The year-on-year inflation rate also accelerated, reaching 5.2% from the previous 4.9%. These figures generally aligned with the expected outcomes, with estimates from Goldman Sachs predicting a 0.53% monthly increase and a 5.2% year-on-year rate, which was in line with Bloomberg's consensus.

Digging deeper into the data, the underlying details of the CPI were stronger than anticipated. The seasonally adjusted core CPI, excluding volatile items and travel prices, rose by 0.5% on a monthly basis and reached a 5.5% year-on-year rate. This exceeded expectations by about 20 basis points.

Regarding monetary policy, it is expected that the Reserve Bank of Australia (RBA) will maintain its current stance in October due to the volatility in the monthly data. The RBA's board, now under the leadership of Governor Michele Bullock, is likely to wait for the release of Australia's quarterly CPI data on October 25th and updated staff forecasts before considering an interest rate hike in November. The projection is for a 25-basis point increase, bringing the rate to 4.35%, driven by the persistent services inflation observed in the economy.

Australia's August CPI showed a notable increase, rising by +0.58% month-on-month, compared to a previous increase of +0.25%. The annual inflation rate also accelerated by +30 basis points to reach 5.2% year-on-year. These figures were largely in line with expectations, with Goldman Sachs forecasting a +0.53% month-on-month increase and a 5.2% year-on-year rate, which closely matched Bloomberg's consensus.

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