AUD/USD drops as Australian CPI cools to 3.8%, easing RBA rate hike fears

AUD/USD faces downward pressure after Australia's June CPI printed at 3.8% y/y, significantly below the 4.0% consensus, with the monthly figure declining 0.1% versus an expected 0.2% rise. The Q2 CPI came in at 4.0% y/y versus the 4.1% forecast, while the quarterly reading of 0.6% also undershot the 0.7% expectation. Crucially, the RBA's preferred trimmed mean measure eased to 3.6% y/y against 3.7% expected, and the weighted mean matched at 3.6%. The across-the-board softness in inflation readings effectively removes the near-term case for an RBA rate hike, unwinding the modest hawkish expectations that had been building in money markets. This data gives the Reserve Bank of Australia room to remain on hold and assess incoming data before making any policy adjustments. Traders should watch for key support near recent session lows, while resistance aligns with pre-release levels. The cooler inflation print is likely to weigh on the Australian dollar against major counterparts, particularly versus the USD and JPY, as interest rate differentials shift against AUD positioning.