The Australian economy is also affected by inflation.

The Australian dollar has started to depreciate in the short term following reports of high inflation rates. The monthly Consumer Price Index (CPI) in Australia has decreased slightly to 5.4%, which aligns with earlier predictions. This CPI announcement represents the lowest inflation rate since February 2023, although it still remains higher than the Reserve Bank of Australia's target range of 2-3%. The decrease in CPI can be attributed mainly to a slowdown in the prices of housing, food, and transportation.

Regarding food inflation, Australia's annual food price inflation dropped to 7.5% in the second quarter from 8.0% in the first quarter, primarily due to easing cost pressures. However, certain food items like fruits, bottled water, milk, and related products still experienced higher inflation rates.

Data from the Australian Bureau of Statistics (ABS) indicates that retail sales declined by -0.8% in June on a month-on-month basis, falling short of expectations that predicted a 0% change. This decline in retail sales is the most significant drop since December, attributed to the ongoing cost of living pressures and relatively high production costs, which continue to impact consumer spending.

Consumer confidence in Australia increased by 2.7% month-on-month in July, reaching 81.3. This rise came after a 0.2% increase in June. The boost in consumer confidence can be attributed to a moderation in inflation rates and the Reserve Bank of Australia (RBA) easing its previously stringent monetary policy. Measures for family finances over the next 12 months are expected to rise by 6.8%, and economic conditions over the next 12 months are projected to increase by 5.4%.

Despite the recent decision of the Reserve Bank of Australia (RBA) to maintain the interest rate at 4.1%, overall inflation has been considered to be easing, alleviating pressure on the RBA. As a result, some analysts predict that the upcoming meeting on August 1st might see the interest rate remaining at 4.1% going forward.

Ivan Colhoun, an economist from NAB, suggested that while inflation signals that risks remain elevated in Australia in the coming months, interest rates are also nearing their peak. Other analysts, such as JPMorgan, AMP, Capital Economics, Barclays, and HSBC, expect no further rate hikes, while Goldman Sachs projects a maximum interest rate of 4.6%.

The yield on Australia's 10-year government bonds is hovering around 4% due to unclear market reactions, as inflation data has shown a more significant slowdown in the second quarter. This has helped ease pressure on the Reserve Bank of Australia, allowing them to maintain a balanced monetary policy going forward.

Techical analysis data (5H)

Resistance: 1.5060, 1.5125, 1.5199

Support: 1.4921, 1.4847, 1.4782

Source: Investing.com