AUD tumbles as impact of tariffs filter into inflation
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Daily Currency Update
The Australian dollar fell through trade on Tuesday following an uptick in US inflation pressures. CPI data for June showed the impact of tariffs is beginning to filter through into the price of goods as the cost for appliances, household furnishings, toys and sporting goods all rose to multi-year highs. Headline inflation rose 0.3%, forcing the annual rate of inflation up to 2.7%, prompting investors to trim expectations for rate cuts through the rest of 2025. Markets are now pricing just 44bps of cuts, down from 49bps, while US treasury yields are up helping drive USD gains. Having edged higher through the domestic session and early hours of overnight trade the AUD appeared poised to make another push toward US$0.66, but instead tumbled off US$0.6575 to an intraday low at US$0.6509. Having found support on moves approaching US$0.65, the AUD opens this morning buying US$0.6514.Our attentions turn now to UK CPI data and US PPI data, a key marker for the Feds preferred inflation measure, while tariff headlines continue to drive the risk agenda.
Key Movers
The USD rose on Tuesday as price action was dominated by US CPI data. The DXY index closed 0.5% higher led by a near 1% gain against the yen and half percent gains against the euro and CHF. US treasury yields rose 5bps after inflation data showed the impact of tariffs is finally filtering through to the broader economy. Across products subject to import, taxes prices rose to multi-year highs, while prices fell across sectors linked to travel and leisure services. International travel to the US has fallen sharply through 2025, while domestic travel has slowed significantly. Cut backs on discretionary spending is hurting specific sectors and weighing on the near-term growth outlook. Unsurprisingly, President Trump lauded the CPI print, suggesting inflation pressures remain weak and that tariffs are having little impact on prices. Trump also ramped up his campaign to strong arm the Fed into lowering rates, calling for a 3-point cut (we assume he meant 300).In tariff news, the US announced a trade agreement had been reached with Indonesia. A baseline tariff of 19% will be applied from August 1, a significant reduction on the 32% tariff imposed on liberation day.
Our attention remains affixed to tariff headlines, while UK CPI data and US PPI numbers dominate the macro agenda.
Expected Ranges
- AUD/USD: 0.6480 - 0.66 ▼
- AUD/EUR: 0.5580 - 0.5650 ▲
- GBP/AUD: 2.0400 - 2.0700 ▲
- AUD/NZD: 1.0900 - 1.1000 ▼
- AUD/CAD: 0.8900 - 0.9000 ▼