Australian Dollar Steady, Markets Assess Inflation Risks from Iran Conflict
The Australian dollar (AUD) held around $0.72 after correcting from its multi-year high, resulting in a relatively flat week. Pressure emerged as markets returned to caution in the face of rising geopolitical tensions.
Investors' attention remains focused on developments in the US-Iran conflict. The latest clashes have dampened hopes for a peace deal in the near future, as the US awaits Iran's response to its proposal to reopen the Strait of Hormuz, a vital route for global energy flows.
The primary risk to the market is the energy pipeline leading to inflation. The near-total closure of the Strait of Hormuz and the energy price shock are seen as fueling inflation concerns, potentially keeping global interest rates higher for longer. This is a factor shaping monetary policy expectations, including for risk-sensitive currencies like the AUD.
In Australia, the market currently prices a roughly 20% chance of another interest rate hike in June by the Reserve Bank of Australia (RBA), following a total tightening of 75 bps to 4.35% in the last three meetings. The probability of a hike increased to around 68% in August, with the terminal interest rate approaching 4.60% almost fully priced in by September. (asd)*
Source: Newsmaker.id
