AUD and ASX jump after US inflation slow

Traders scaled back bets of a third consecutive 0.75 percentage point increase at the Federal Reserve's September meeting, with the weight of money shifting to a 57 per cent chance of a 0.5 percentage point rise.

Futures remain fully priced for a 0.25 percentage point lift in the Reserve Bank cash rate in September. Nine.

On a month-on-month basis, inflation didn’t rise at all in July, undershooting consensus for a gain of 0.2 per cent.

Financial markets are currently pricing in a peak Fed funds rate of 3.75 per cent by year-end, with rate cuts to follow in 2023 as policymakers attempt to counter the forecast economic weakness.

Interbank futures remain fully priced for a 0.25 percentage point lift in the Reserve Bank cash rate in September, and a one-in-three chance of a bigger increase of 0.5 percentage points.

In June, futures had projected the terminal, or peak, Reserve Bank cash rate above 4.2 per cent.

The 10-year rate fell 14 basis points to a low of 2.67 per cent, but is now back up to 2.79 per cent.