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Australian CPI Data Supports RBA’s Cautious Approach on Rate Cuts

Australian dollar edges higher and ASX 200 holds firm as hotter CPI data reinforces the RBA’s cautious stance on rate cuts.

Matt Simpson
Matt Simpson

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Australian CPI Data Supports RBA’s Cautious Approach on Rate Cuts

The Reserve Bank of Australia (RBA) may be vindicated in taking a cautious approach to rate cuts, judging by the latest inflation figures. Headline CPI came in above expectations, and while part of the increase reflects the delay of government electricity rebates, inflation pressures are also evident elsewhere.

Housing costs climbed 3.6% y/y in July, with rents up 3.9%, fuel up 4.7%, and electricity surging 13.1%. The rise in electricity alone is estimated to have added 0.4–0.5 percentage points to headline CPI.

Even the trimmed mean CPI — which excludes the top and bottom 15% of volatile items — rose 2.7% y/y, up from 2.1% in June, marking its largest monthly increase since December 2022.

The RBA were unlikely to cut rates at their next meeting before these figures dropped, and they’re much less likely to now.

 

 

Australia CPI trends July 2021–July 2025 showing monthly CPI indicator, trimmed mean and CPI excluding volatile items. Inflation rebounded in July 2025, with trimmed mean at 2.7% and headline CPI at 2.8% y/y

Chart prepared by Matt Simpson – Data source: Australian Bureau of Statistics (ABS), London Stock Exchange Group (LSEG).

 

Australian Inflation Surges Across the Board

  • Trimmed mean CPI: +2.7% y/y (vs 2.1% prior)
  • Weighted mean CPI: +2.8% y/y (vs 1.9% prior)
  • CPI ex volatile items & travel (SA): +3.1% y/y (vs 2.5% prior)
  • Headline CPI: +2.8% y/y (vs 1.8% prior), +0.9% m/m (vs 0.2% prior)

 

Australia CPI by sector July 2025 showing strong gains in housing, rents, fuel and electricity. Education and alcohol prices also rose, while transport lagged, keeping household inflation pressures elevated.

Chart prepared by Matt Simpson – Data source: Australian Bureau of Statistics (ABS), London Stock Exchange Group (LSEG).
 

 

Australian Dollar Slightly Bid After CPI Surprise

Stronger-than-expected CPI data lifted the Australian dollar across the board, though the muted volatility shows traders are really waiting for Friday’s US PCE report. Since the RBA was already unlikely to cut, the data does not shift the policy outlook — and without fresh rate-hike speculation, upside potential for the Aussie remains capped.

AUD/USD briefly teased bulls with a sustained break above 0.65, but momentum has since faded and the pair is now trading slightly lower on the day. AUD/NZD initially pushed above 1.11 before handing back more than half of its earlier gains. I continue to expect AUD/NZD to undergo a pullback on the daily chart before resuming its uptrend beyond 1.11.

Forex daily performance chart showing D1 candles from Asia open and daily range relative to ATR (10). GBP/CAD, AUD/CHF, and CAD/CHF led gains, while NZD/CAD and GBP/USD underperformed. Chart highlights volatility compression and range expansion across FX majors and crosses. Data source: LSEG

Chart analysis by Matt Simpson - Source: LSEG

 

SPI 200 (ASX 200 Futures) Technical Analysis:

The ASX 200 reached my 9,000 upside target last week, but a retracement has since emerged after a shooting star candle printed on the milestone day. Still, the pullback remains shallow within what is clearly a strong uptrend.

Today’s low is holding above the 20-day EMA, and ASX bulls are attempting to lift price back above the 10-day EMA.

The 15-minute chart shows ASX 200 futures finding support around the overnight VPOC (volume point of control), with a prominent bullish pinbar rebounding from 8,900. Given the strength of this rebound — even with the RBA expected to hold rates higher for longer — dips appear favourable for bulls in the near term.

ASX bulls may look for an intraday swing low around 8,910 as a potential springboard for a move towards the overnight highs near 8,950.

ASX SPI 200 futures daily and 15-minute charts showing shallow pullback from 9,000 resistance, support at 8,900–8,910, and bullish rebound targeting 8,950

Chart analysis by Matt Simpson - Source: TradingView, ASX SPI 200 Index Futures

 

View the full economic calendar
View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

 

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