US-Iran Uncertainty Pressures Aussie
The Australian dollar weakened against the US dollar in the Asian session on Tuesday, with AUD/USD hovering around 0.7170 after recording limited gains the previous day. The weakening occurred as the US dollar strengthened, supported by demand for safe-haven assets amid uncertainty surrounding the US-Iran ceasefire negotiations ahead of the 14-day deadline.
Market sentiment remained fragile as President Donald Trump delivered mixed signals regarding the direction of the conflict with Iran, including stating that he was in no rush to end the war. At the same time, Trump expressed optimism that a new round of talks with Tehran could soon take place in Pakistan, even though the ceasefire was scheduled to expire on Wednesday.
From Iran's side, Parliament Speaker Mohammad Bagher Ghalibaf stated that Iran would not negotiate with the US as long as it was under threat. Foreign Minister Abbas Araghchi also emphasized that the alleged ongoing "ceasefire violations" were a major obstacle to progress in the diplomatic process.
On the fundamental side of Australia, the prolonged conflict was said to be disrupting global energy supplies and increasing inflation risks, fueling expectations of additional interest rate hikes by the Reserve Bank of Australia (RBA). The market also believes the strength of the Australian labor market strengthens the case for further tightening, leading market participants to increasingly factor in an interest rate hike at the next policy meeting.
Investors' next focus will be on the release of preliminary PMI data later this week for clues on growth direction. For short-term movements, AUD/USD remains sensitive to a combination of risk-off US dollar strengthening and changes in RBA interest rate expectations influenced by energy inflation dynamics. (asd)
Source: Newsmaker.id
