The Australian dollar slipped below $0.698, retreating from multi‑week highs as investors reassessed the interest rate outlook following fresh remarks from the Reserve Bank of Australia’s governor. Michele Bullock indicated that another rate increase may still be required to return inflation to target, but emphasized that the near‑term outlook remains highly uncertain. She also suggested that a further cooling in domestic demand and labor market conditions will likely be needed before policymakers can determine whether past tightening has been sufficient.
Her comments prompted markets to reduce the implied probability of an August rate hike to about 20%, down from roughly 30%, though investors still expect the cash rate to rise to 4.60% by year‑end. Attention now turns to Wednesday’s second‑quarter CPI release, with core inflation forecast to accelerate to 3.7%, staying above the RBA’s 2%–3% target band. At the same time, a pause in US–Iran hostilities lent support to the risk‑sensitive Australian dollar.
