The Aussie has traded a relatively tight range this week, holding steady in the wake of a neutral RBA minutes as markets await today's CPI print and this week's Jackson Hole Symposium.
Locally, the focus was on the RBA minutes, which struck a broadly neutral tone. The Board judged the economy was progressing towards its objectives, with inflation easing from its March peak and underlying inflation slightly below late-2025 levels, though members still viewed inflation as too high and the economy as running with excess demand.
The Board acknowledged that it weighed a 25bp hike against keeping rates steady. The case to tighten rested on upside inflation risks warranting pre-emptive action, and several members saw those risks as quite possibly crystallising, requiring further tightening later, while others pointed to offsetting downside risks. The case to hold rested on policy already being sufficiently restrictive, with data since the last meeting showing steady progress towards the inflation and employment objectives, even as unemployment rose slightly more than expected in May. Overall, the minutes, in our view were largely neutral flagging two-sided risks. Indeed, we continue to expect the RBA to stay on hold through year-end and into 2027, with an upside inflation surprise the main risk to this view.
Looking ahead, the domestic focus turns to July CPI data due out later today. We expect headline inflation to rise 0.8% MoM (0.4% in seasonally adjusted terms), which would see the annual rate ease to 3.2% from 3.7%. Given ongoing volatility at the headline level, the RBA will keep its focus on underlying inflation, which is expected to remain elevated but show some signs of modest easing.
Elsewhere, attention turns to the US PCE report and the Jackson Hole Symposium. Core PCE, the Fed's preferred inflation gauge, is expected to rise 0.2% MoM, keeping the annual rate steady at 3.3%, with little sign that inflationary pressures are broadening across the US.
Later in the week, the bigger risk is a hawkish surprise from Fed Chair Warsh's Jackson Hole address on Friday. US data has softened markedly in the weeks leading into the symposium, with September hike odds falling to around 40% from 70% a few weeks ago, tilting the balance of risks that direction. In our view, Jackson Hole tends to move currency markets only when the Fed Chair signals a shift in the reaction function itself, rather than near term guidance, though this year carries added risk given Warsh has flagged a new policy framework. Even so, his preference for a smaller balance sheet points to a reduced Fed footprint and higher bond yields, rather than a hawkish shift in rate policy
