AUD/USD Holds Near a 10-Week High Before Australia’s July Inflation Report

Key Takeaways

• AUD/USD traded around 0.7155, holding close to its highest level in approximately ten weeks despite weaker Australian employment data.
• Australia’s July Consumer Price Index will be released on August 26 at 11:30 a.m. AEST, with economists expecting a strong monthly increase but a lower annual inflation rate.
• A hotter underlying inflation reading could revive expectations of another Reserve Bank of Australia rate hike, while softer data may push AUD/USD back toward 0.7100.

AUD/USD remained near a ten-week high on Tuesday as traders prepared for an Australian inflation report that could determine whether the Reserve Bank of Australia has finished raising interest rates.

The currency pair traded at approximately 0.7155 during the Asian session, supported by broader US dollar weakness and Australia’s relatively high interest rate. The Australian dollar has held its ground despite signs that the domestic labour market is cooling, suggesting that global currency trends have recently provided more support than Australian economic data.

The next major test will arrive on Wednesday, when the Australian Bureau of Statistics releases the July Consumer Price Index.

When Will Australia Release the July CPI Report?

Australia’s July CPI report is scheduled for August 26 at 11:30 a.m. AEST, according to the Australian Bureau of Statistics release calendar.

The previous report showed that headline inflation slowed to 3.8% in June from 4% in May. Prices fell 0.1% on a monthly basis, while trimmed mean inflation remained unchanged at 3.6%.

Both annual measures remain above the RBA’s 2% to 3% target range, leaving policymakers with limited room to declare victory over inflation.

Economists expect the July report to deliver a complicated combination of stronger monthly price growth and softer annual inflation because of base effects.

Westpac forecasts headline CPI to rise 0.84% month over month but expects the annual rate to decline to 3.3%. The bank projects trimmed mean inflation of 0.38% for the month and 3.5% from a year earlier.

Holiday travel and fuel are expected to make the largest positive contributions. Westpac expects higher petrol prices to reflect a partial reversal of temporary fuel-tax relief, while electricity prices could decline and offset part of the increase. Westpac’s July CPI preview also suggests that underlying six-month inflation momentum may remain elevated even if the annual rate edges lower.

Why the CPI Report Matters for the RBA

The Reserve Bank of Australia held its cash rate at 4.35% during its August meeting after raising rates three times earlier in 2026.

In its latest decision, the RBA said headline inflation remained too high and warned that some businesses were passing higher input costs on to customers. The central bank also noted that energy and commodity prices remained above levels seen before the Middle East conflict.

The RBA expects inflation to return to the midpoint of its target range only in early 2028. Although monetary policy is already restrictive, officials have made clear that another increase remains possible if inflation proves more persistent than expected. The position was outlined in the RBA’s August monetary policy decision.

A trimmed mean reading above expectations would strengthen the argument that domestic price pressures remain embedded. That could encourage traders to increase bets on another rate hike later this year, raising Australian bond yields and potentially supporting the Australian dollar.

A softer result would reinforce expectations that the 4.35% cash rate has peaked. It would also allow the RBA to focus more heavily on slowing employment, household demand and housing activity.

Weak Employment Data Has Not Derailed the Australian Dollar

Australia’s July labour report was weaker than expected. Employment decreased by 15,800 positions, including a 32,200 decline in part-time employment. Full-time employment rose by 16,300, partly offsetting the overall contraction.

The unemployment rate increased marginally to 4.5%, while both the participation rate and employment-to-population ratio declined by 0.2 percentage points. The official ABS labour report showed that total employment stood at approximately 14.81 million.

Normally, weaker employment and rising unemployment would reduce interest rate expectations and weigh on the domestic currency. However, AUD/USD has remained close to its recent high because the US dollar has struggled to build sustained momentum.

This divergence makes the inflation report particularly important. If Australian CPI surprises to the upside, AUD/USD would receive support from both a weaker US dollar and renewed RBA tightening expectations. If inflation disappoints, the pair may become more vulnerable to a correction.

US Dollar Weakness Supports AUD/USD

The Australian dollar’s recent advance is partly a US dollar story. Concerns about US fiscal sustainability, Treasury-market volatility and the Federal Reserve’s policy direction have limited demand for the greenback.

EUR/USD has remained near a three-month high, while GBP/USD is trading close to its strongest level in six months. These moves indicate that dollar weakness extends beyond the Australian currency.

Markets are also awaiting Federal Reserve Chair Kevin Warsh’s Jackson Hole speech on August 28. Traders will watch for guidance on how the Fed intends to balance persistent inflation against signs of slower job creation and growing fiscal risks.

A hawkish message from Warsh could lift US Treasury yields and place AUD/USD under pressure. A softer policy signal would likely reinforce the dollar’s recent weakness and give the Australian dollar another opportunity to test resistance.

AUD/USD Technical Levels to Watch

AUD/USD faces immediate resistance at 0.7200. A sustained break above this psychological level could expose 0.7250, particularly if Australian underlying inflation exceeds expectations.

On the downside, 0.7100 is the first important support area. A move below that level could open the way toward the 0.7030 to 0.7050 region, followed by the major 0.7000 threshold.

The possible inflation scenarios are:

• Hotter CPI: Higher headline and trimmed mean inflation could revive RBA rate-hike expectations and push AUD/USD toward 0.7200 or 0.7250.
• CPI broadly in line: AUD/USD may consolidate between 0.7100 and 0.7200 while traders wait for the Fed’s Jackson Hole signals.
• Softer CPI: Evidence of faster disinflation could weaken the Australian dollar and bring 0.7100 back into focus.

AUD/USD has shown resilience despite weaker employment, but the July CPI report will test whether that strength can continue. The most important figure may not be the headline monthly increase, which is expected to be affected by fuel and travel costs, but the trimmed mean measure that better reflects persistent domestic inflation.