AUSTRALIA DATA: Underlying Inflation Picks Up But Volatile
July trimmed mean CPI inflation jumped to 2.7% y/y from 2.1% and headline to 2.8% from 1.9%. The monthly data are incomplete, for instance services aren’t updated in the first month of the quarter, and headline continues to be impacted in both directions by government electricity rebates. As a result, the RBA continues to focus on the quarterly data with Q3 not released until October 29. Comprehensive monthly CPI data is scheduled for November 26 but it will take time for seasonal trends to emerge.
Australia underlying inflation y/y%
Source: MNI - Market News/ABS
- In terms of underlying inflation, the trimmed mean was its highest in July since April. There was a strong monthly rise in CPI ex volatile items & holiday travel at +0.6% m/m to be 3.1% y/y seasonally adjusted, highest in almost a year, after 2.5% y/y in June. The 3-month annualised momentum remains around 4%, where it has been over most of 2025, and 6-month is just over 3.5%.
- The headline was boosted by a 13.1% y/y rise in electricity prices in July after falling 6.3% in June. They rose 13% m/m due to Commonwealth rebates not paid to households in NSW and ACT which will occur in August. Outside of government payments, electricity rose 4.8% m/m due to the yearly review.
- Other components were contained with rents up 3.9% y/y down from 4.2%, new dwellings rose 0.4% in line with June, and food & non-alcoholic beverages 3% y/y after 3.2%.
Australia inflation 3-month momentum %
Source: MNI - Market News/ABS
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JGBS: Belly Leads Yields Lower, Light Local Calendar, BoJ Decision On Thursday
In Tokyo morning trade, JGB futures are stronger and at session highs, +31 compared to settlement levels.
- Today, the local calendar will be empty ahead of 2-year supply on Tuesday.
- This morning has seen US equity futures gap higher in response to the US-EU trade deal.
- (Bloomberg) Japanese stocks edged lower as semiconductor-related stocks declined ahead of reporting earnings this week. Uncertainties over Prime Minister Shigeru Ishiba’s political future also weighed on investor sentiment.
- Cash US tsys are little changed in today’s Asia-Pac session.
- Cash JGBs are 4bps richer to 2bps cheaper across benchmarks, with the futures-linked 7-year outperforming. The benchmark 10-year yield is 2.6bps lower at 1.579% versus the cycle high of 1.616%.
- Two-year JGB auctions typically pass under the radar, but Tuesday’s will be spicier than usual as it lands ahead of a Bank of Japan meeting, which is set to deliver guidance on the next policy tightening. (BBG)
- Swap rates are 2bps lower to 1bp higher, with a steeper curve. Swap spreads are mixed.
ASIA STOCKS: Positive Taiwan Inflow Trend Continues, Thailand Inflows Slowed
Taiwan net equity flows remained the standout into the end of last week. The 5-day sum was +$1.422bn. This is down slightly from recent highs (just above $2.5bn), but the 5-day rolling sum of net inflows has been positive since late June, indicating consistent positive inflow momentum, as Taiwan equities ride firmer chip/AI sentiment. The Taiex sits just off multi month highs in latest dealings this morning.
- Inflows also remained positive into South Korea, with last week seeing slightly stronger inflow momentum at +$1.64bn compared to Taiwan. Still, Taiwan maintains better inflow trends more broadly. The Kospi still struggles above the 3200 level though and has been volatile in the first part of trade today. We shot higher on positive Samsung chip order headlines, but haven't been able to sustain these gains.
- Focus also remain on US-South Korea trade negotiations ahead of the Aug 1 deadline this Friday, with focus on US access to South Korean agricultural markets, while South Korea may also invest into US shipbuilding.
- Recent positive Thailand equity inflow momentum slowed on Friday, with border clashes between Thailand and Cambodia not likely helping sentiment. Still net outflows were very modest and remain up strongly in the past 5 days. Note Thailand markets are closed today.
- Elsewhere flow trends were generally negative, with India still struggling to see upside momentum.
Table 1: Asian Markets Net Equity Flows
| Yesterday | Past 5 Trading Days | 2025 To Date | |
| South Korea (USDmn) | 263 | 1640 | -6356 |
| Taiwan (USDmn) | 331 | 1422 | 1695 |
| India (USDmn)* | -231 | -113 | -9008 |
| Indonesia (USDmn) | -14 | -8 | -3611 |
| Thailand (USDmn) | -8 | 273 | -1951 |
| Malaysia (USDmn) | -32 | -21 | -2863 |
| Philippines (USDmn) | 2 | 6 | -616 |
| Total (USDmn) | 310 | 3199 | -22709 |
| * Data Up To July 24 |
Source: Bloomberg Finance L.P./MNI
AUSTRALIA: All Eyes On Wednesday’s Q2 CPI Data
The focus of this week will be Wednesday’s Q2 CPI data which is expected to show the underlying trimmed mean measure making further progress towards the band mid-point of 2.5%. Bloomberg consensus is forecasting a 0.7% q/q rise bringing the annual rate to 2.7% after 0.7% & 2.9% in Q1. This is slightly higher than the RBA’s May Q2 forecast of 2.6%. Services developments will also be monitored. The RBA is expected to cut rates 25bp on August 12.
- Q2 headline CPI will continue to be impacted by state and federal government electricity rebates. It is expected to rise 0.8% q/q and 2.2% y/y down from 2.4% y/y. The monthly June headline is forecast to be unchanged at 2.1% y/y.
- On Thursday, RBA Deputy Governor Hauser appears at the Barrenjoey Economic Forum at 0920 AEST. This is also likely to be watched closely following the RBA’s surprise July decision to hold rates.
- Thursday also sees Q2 retail sales volumes which are projected to rise only 0.1% q/q after a flat Q1 reading consistent with ongoing disappointing private consumption.
- June monthly retail sales values are also on Thursday but this will be the last release with household spending, which includes services, to replace it thereafter. Consensus expects a 0.4% m/m rise after 0.2% in May.
- Building approvals for June are also on Thursday and are forecast to rise 1.8% m/m after 3.2%. The series is notoriously volatile due to the multi-dwelling component.
- Q2 trade prices print Thursday with export prices expected to fall 3% q/q and import 0.4% q/q after rising 2.1% and 3.3% in Q1 respectively. A print in line with this would suggest a deterioration in the terms of trade.
- Other data include RBA June private credit released Thursday, Q2 PPI Friday, Cotality July home values Friday and final July S&P Global manufacturing PMI Friday.
