Australia’s 10-year government bond yield held its recent decline to around 4.9%, below a nine-week high reached on July 24, as investors continued to assess the policy outlook ahead of the Reserve Bank’s meeting next week.
Latest data showed household spending rose 0.8% in June, well above forecasts of 0.2%, driven by another increase in discretionary spending, while annual growth accelerated to 6.0%, also exceeding expectations.
The data supported the central bank’s view that consumer activity remains firm despite weak sentiment, although recent softer inflation and a cooling housing market have strengthened expectations that the RBA will leave its 4.35% cash rate unchanged next week.
Markets are also pricing little chance of a rate hike in September, while assigning roughly a 50% probability of a move in November if third-quarter inflation proves stronger.
Investors now await upcoming final PMI figures and trade balance data this week for further clues on the economy’s health.