Weaker AUD to push Australia's headline CPI up in Q2

With a number of familiar themes, the RBA's latest set of minutes from its July board meeting and steady rate verdict were balanced, slightly more positive tone on the labour market, and modest strengthening of its rhetoric around the currency. Market focus turns to Q2 CPI and Governor Stevens's speech in Sydney. 

"Higher fuel prices and lagged effects of the weaker AUD should conspire to push headline CPI up from 1.3% to 1.7% in Q2", says RBC Capital Markets. 

Domestically generated inflationary pressures, however, remain weak given the sluggish pace of wage growth and stagnant unit labour costs. 

"This is expected to be reflected in the core measures, including a 0.2ppt deceleration in the trimmed mean metric to 2.1%y/y. The suite of inflation indicators should continue to provide more than enough leeway for further easing, which we expect will next occur in Q4", added RBC.