AUD/USD Strengthens, Risk-On US-Iran Peace Pressures Dollar
The AUD/USD strengthened by around 0.5% to the 0.7080 area during the Asian session on Monday (June 15), supported by improving risk sentiment after the United States and Iran reportedly reached an agreement to end the conflict. This news dampened demand for the US dollar as a safe-haven asset and provided room for risk-sensitive currencies like the Australian dollar.
The AUD's strengthening occurred despite the market almost completely discounting the possibility of a Reserve Bank of Australia interest rate change at its meeting on Tuesday. Furthermore, expectations for an RBA interest rate hike in August have also declined, so domestic support for Australia remains limited.
The main catalyst currently comes from external factors. The US-Iran deal is expected to take effect on Friday, with the US lifting its naval blockade on Iranian ports and the Strait of Hormuz reopening after the agreement is signed. If it goes ahead, the risk of global energy disruptions could decrease, inflationary pressures could ease, and appetite for risky assets could potentially improve.
From the US perspective, the likelihood of a Fed interest rate hike also decreased following the peace news. The CME FedWatch report shows the probability of a December interest rate hike has dropped to around 27%, from 40% a week earlier. This drop in Fed expectations has put additional pressure on the US dollar and helped AUD/USD maintain its strength.
However, the AUD/USD's gains still need confirmation from Australian inflation data. The market's next focus will be on the May CPI on June 24, which will be a key reference for the RBA to assess whether price pressures remain strong enough to open the door to further tightening. As long as risk-on sentiment persists and the US dollar remains weak, AUD/USD still has short-term support, but upside room could be limited if the RBA remains cautious. (asd)
Source: Newsmaker.id
