RBA, UK Jobs, and US CPI: What's Driving the Markets Today?

Key Highlights:

Recent economic data reveals a nuanced picture for the UK job market. Rather than a severe downturn, the data suggests a moderation in growth. This indicates the market is loosening, but it's not on the verge of collapsing. It's a subtle but important distinction for anyone following economic trends.

Meanwhile, global markets are keeping a close eye on the U.S. dollar, which has been losing some ground. A key factor driving this trend is the anticipation of today's upcoming CPI (Consumer Price Index) report, a critical measure of inflation. The report's outcome will likely influence the dollar's performance and could have a ripple effect across other currencies and asset classes.

Market Recap:

The U.S. Dollar Index (USD Index) experienced a slight gain yesterday, rising by 0.3%. This upward movement came as investors prepared for today's release of the Consumer Price Index (CPI) report, which is widely expected to show an increase in prices for July.

This report is a key piece of the puzzle for market participants. The anticipation of higher inflation figures could influence the odds of the Federal Reserve cutting interest rates in the near future. Currently, there's a strong belief—with an approximately 86% probability—that a 25-basis point rate cut will be enacted in September. However, a hotter-than-expected CPI number could reduce these expectations and potentially give the U.S. dollar, which has been facing pressure since the recent non-farm payrolls data, renewed strength.

Today's Market Update:

Reserve Bank of Australia Eases Policy

As expected, the Reserve Bank of Australia (RBA) has cut its official cash rate by 25 basis points to 3.6%. RBA Governor Bullock's comments indicate a cautious approach, signalling that while further rate adjustments are possible, future decisions will be made on a meeting-by-meeting basis. This move, which was accompanied by a reduced GDP outlook, highlights the RBA's focus on managing the economy, particularly as core inflation is now closer to their 2-3% target.

UK Job Market Softening, but Not Crashing

The latest employment data from the UK shows a continued easing of the job market. Private sector wage growth slowed to 4.8% year-on-year, while both payroll numbers and job vacancies saw a decline. This indicates that the labour market is losing some of its previous heat, but it's not in a state of collapse. This trend reinforces the case for a potential Bank of England rate cut in December and helps to prevent a significant drop in the British Pound (GBP) for now. The prospect of further fiscal tightening in the upcoming budget will also likely add to the arguments for lower interest rates.

US and China Trade Developments

There's some good news on the global trade front, as the U.S. and China have extended their tariff truce for another 90 days. This has helped to keep markets relatively stable this morning, providing a temporary sense of relief for investors.

The Focus Shifts to US Inflation

All eyes are now on today's U.S. Consumer Price Index (CPI) report. The market anticipates an increase in July prices. This data is critical, as a "hotter" inflation reading could lead to a reassessment of the Federal Reserve's future policy moves. Currently, there is a high probability (around 85%) priced into the market for a September rate cut. However, if the CPI report suggests that inflationary pressures are easing, these odds could firm up, potentially leading to a larger rate cut being priced in and putting downward pressure on the U.S. dollar.

12th August 2025

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