Australia's July monthly CPI is forecast to show headline inflation easing sharply to 3.2-3.3%, but the RBA's preferred trimmed mean gauge is tipped to hold closer to 3.5%. Traders are positioning for the trimmed mean, not the headline print, to decide whether the Aussie dollar gains or gives back ground, keeping a September rate hold in play.
The trimmed mean, not the widely expected headline drop, is what will move AUD/USD when Australia's Bureau of Statistics releases its July monthly Consumer Price Index at 11:30am AEST. A reading at or below the 3.5% consensus would reinforce bets on an RBA hold in September and could see the currency give back ground on reduced tightening expectations. A hotter than expected trimmed mean, closer to the 0.4% month-on-month pace flagged by Westpac, risks reviving talk of further tightening and would likely support AUD buying.
Headline drop is a base-effect story
All four major banks expect headline annual inflation to fall sharply from June's 3.8% reading. CBA and ANZ have forecast 3.2%, while NAB and Westpac see 3.3%. Should the softer end of that range be confirmed, it would mark the lowest headline rate since August 2025. But economists caution the improvement is largely mechanical: a 1.3% price rise from July last year drops out of the annual calculation, rather than reflecting a genuine acceleration in disinflation.
Trimmed mean holds the RBA's attention
The major banks are aligned in expecting the trimmed mean, the measure the RBA uses to judge underlying price pressure once volatile items are stripped out, to ease modestly to around 3.5% from 3.6% in June. Westpac has gone further, forecasting the trimmed mean will still rise 0.4% on a month-on-month basis, a pace it notes sits slightly above the RBA's own projection track.
The release lands just over two weeks after the Reserve Bank held its cash rate at 4.35% on 11 August, a decision all four majors had aligned on after June quarter CPI data removed the immediate case for further tightening. That quarterly print showed headline inflation at 3.8% and trimmed mean holding at 3.6%, prompting Westpac, previously the lone hawk among the majors, to abandon its call for additional rate rises.
Today's monthly indicator will feed directly into expectations for the RBA's next board meeting in late September. An in-line or softer trimmed mean would strengthen the case for an extended hold. An upside surprise in the underlying reading, even alongside a lower headline number, risks reopening debate about further tightening. Currency markets are positioned to react more to the core inflation outcome than to the anticipated headline decline, given the latter's well-flagged base-effect origin.
Source: Investinglive
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