Australia’s 10-year government bond yield climbed toward 5%, reaching its highest level in nine weeks, as mounting risks to global energy supplies stoked fresh inflation concerns. In the US, President Donald Trump downplayed the likelihood of imminent talks with Iran after both sides exchanged strikes near the Strait of Hormuz, while Houthi militants in Yemen issued new threats against shipping in the Red Sea. The resulting jump in oil prices strengthened expectations that the Reserve Bank of Australia may tighten policy further, after lifting the cash rate three times to 4.35%. Money markets are now pricing in an 80% probability of another increase by December.
Against this backdrop, investors are focused on Australia’s June labour market report due Thursday, with consensus forecasts pointing to a 15,000 gain in employment and the unemployment rate holding steady at 4.4%. Second-quarter inflation data, expected next week, will be scrutinized closely: core inflation is projected to quicken to 3.7% year-on-year from 3.5%, remaining well above the RBA’s target range and underscoring the risk of an additional rate hike.
