The Australian Dollar traded little-changed on Wednesday after gains in the previous session, with AUD/USD consolidating following Australia’s Q2 Wage Price Index release. The currency faced headwinds after the Reserve Bank of Australia (RBA) delivered its third rate cut of 2025, citing easing inflation and a softer labour market.
Wage growth rose 0.8% quarter-on-quarter, matching expectations but down from 0.9% in Q1. On an annual basis, wages increased 3.4%, slightly above the 3.3% forecast. The RBA lowered the Official Cash Rate by 25 basis points to 3.6%, as anticipated. Governor Michele Bullock signalled further cuts may be needed to maintain price stability but stressed a meeting-by-meeting approach, avoiding firm guidance amid potential market volatility.
The downside for AUD/USD was cushioned by a weaker US Dollar, which struggled after US CPI data showed annual inflation steady at 2.7% in July, just below expectations. Core CPI rose 3.1% year-on-year, slightly above forecasts. Market pricing now suggests a 94% probability of a Federal Reserve rate cut in September, up from 86% a day earlier, according to the CME FedWatch tool.
Trade sentiment improved after the Trump administration extended its tariff truce with China by 90 days, with Beijing reciprocating. US Treasury Secretary Scott Bessent confirmed that trade officials from both nations will meet in the coming months, though tariff reductions remain contingent on progress in curbing fentanyl flows from China.
In China, July CPI was flat year-on-year, exceeding the -0.1% forecast, while PPI fell 3.6%, matching June’s decline. The RBA reiterated that inflation is moderating but uncertainty persists, reaffirming its commitment to price stability and full employment.
