AUD: Q2 CPI and RBA Governor Stevens’ speech in focus

RBC Capital Markets notes:

Market focus today turns to Q2 CPI and RBA Governor Stevens' speech in Sydney. Higher fuel prices and lagged effects of the weaker AUD should conspire to push headline CPI inflation up from 1.3%y/y to 1.7% in Q2. 

Domestically generated inflationary pressures, however, remain weak given the sluggish pace of wage growth and stagnant unit labour costs. We expect this will be reflected in the core measures, including a 0.2ppt deceleration in the trimmed mean metric to 2.1%y/y (RBC in line with consensus on both measures). For us, the upshot of such an outcome for this report is that inflation indicators should continue to provide more than enough leeway for further easing, which we expect will next occur in Q4.