FX.co ★ Australia 10-Year Yield Falls on Soft Inflation Data

Australia experienced a decline in its 10-year government bond yield, which fell to 4.27%, nearing a three-week low. This movement followed the release of a surprisingly mild inflation report, boosting predictions for an interest rate reduction in the coming month. Headline inflation rates decreased to 2.1% in the second quarter, down from 2.4% in the previous quarter, and slightly below the projected 2.2%. More notably, the "trimmed mean" inflation measure, favored by the Reserve Bank as an indicator of core price trends, eased to 2.7% from 2.9%. This reflects further alignment within the central bank's target range of 2–3%. The report comes on the heels of a disappointing employment report, revealing the first clear signs of weakening in what has been an otherwise robust labor market. Consequently, financial markets are now almost fully anticipating a 25 basis point reduction at the Reserve Bank of Australia's upcoming meeting in August, with expectations for interest rates to decrease to 3.10% by the year's end.