The Antipodean Strategist: Look into my eyes

Research evidence excerpt

The Antipodean Strategist: Look into my eyes

J P M O R G A N Economic Research

30 July 2026

The Antipodean Strategist

Look into my eyes

• The Fed held this week, with dissents and an odd press conference that suggested Australian and New Zealand Interest

the inflation target can be achieved by persuasion. The RBA’s position stands in Rate Strategy

sharp contrast, having already delivered three consecutive hikes to manage what Ben K Jarman AC

had in our view been relatively low inflation expectations risk. In this week’s (61-2) 9003-7982

address, Governor Bullock observed that the board had already “demonstrated ben.k.jarman@jpmorgan.com

that they were prepared to respond, and I would say quite firmly”, which leaves Tom Kennedy

policy well-placed. The next day’s 2Q CPI report underscored that underlying (61-2) 9003-7981

inflation pressures are relatively narrow, which should keep the board on hold tom.kennedy@jpmorgan.com

J.P. Morgan Securities Australia Limited

from here.

• The drift back to outright valuation cheapness in AUD front-end yields through

July has been arrested by the CPI data, and fair value yield estimates should

continue to fall as the market considers RBA cuts in 2027. As such, we have a

bullish bias on three-year yields reflecting the local policy outlook, but given the

Fed backdrop, this is better-expressed in the proxy of an intra-market YM/XM

(3s/10s futures) steepener, which we maintain. Historically, 3s/10s has the

greatest negative beta to inflation surprises at around these relatively flat curve

levels, because downside surprises should matter more at the mature stage of a

tightening cycle.

• The RBA is likely to maintain a moderate tightening bias while spot inflation is