RBA Tug-of-War and Middle East Risks Pressure AUD/USD
AUD/USD weakened slightly in Thursday's Asian trading session, ending a four-day losing streak and retreating from its highest peak since June 2022 around 0.7185. Despite the initial decline, the pair rebounded a few pips from its daily low and moved around 0.7100, down around 0.10%.
The main pressure came from escalating geopolitical tensions in the Middle East, which boosted demand for safe-haven assets like the US dollar. Reports of two tankers being attacked in the northern Persian Gulf near Iraq and Kuwait sent oil prices soaring more than 6%, fueling concerns about supply disruptions and dampening appetite for riskier assets.
On the US side, the latest inflation data showed consumer prices rose 0.2% month-on-month in February, with annual inflation remaining at 3.1%. This figure signals that inflation remains moderate, but the escalation of conflict poses the risk of renewed inflation through energy inflation, which has helped lift US bond yields and strengthen the US dollar.
However, the Aussie's weakness was tempered by a hawkish tone from the Reserve Bank of Australia (RBA). RBA Deputy Governor Andrew Hauser previously assessed that oil prices have the potential to push inflation higher and increase pressure on interest rates, causing the market to shift expectations for the next rate hike sooner.
Domestic indicators also support a tighter policy outlook. A Melbourne Institute report showed Australian consumer inflation expectations for March 2025 rose to 5.2% in February, the highest level since July 2023, while the market is already pricing in a total tightening of around 58 bps for this year.
With the US dollar benefiting from safe-haven flows and the Aussie supported by speculation of an RBA rate hike, the direction of AUD/USD is likely to be influenced by the tug-of-war between these two factors. Market participants will be monitoring developments in the Middle East conflict, oil price movements, and the latest signals from the RBA to determine whether the correction continues or is merely a temporary pause. (asd)
Source: Newsmasker.id
