AUD Weakens as Middle East Tensions Weigh on Market Sentiment
The Australian Dollar (AUD) continued to weaken against the US Dollar (USD) on Monday (23/6), extending its decline for the third consecutive day. This weakening occurred amid rising geopolitical tensions in the Middle East, which depressed global risk sentiment and prompted investors to switch to safe haven assets such as the US Dollar. The AUD/USD currency pair was recorded moving close to its daily low, reflecting strong selling pressure on the commodity currency.
The decline in the AUD occurred after US President Donald Trump announced on Saturday night that the United States had destroyed three Iranian nuclear facilities, Fordow, Natanz, and Isfahan, in an attack that was said to be coordinated with Israel. This attack sparked global concerns, especially after the Iranian Parliament reportedly approved a move to close the Strait of Hormuz, the world's main oil export route. Although Iran has previously threatened to close the strait several times, this is the first time the parliament has approved concrete action, according to a Reuters report.
On the domestic side, Australian economic data released by S&P Global showed relatively stable results. The preliminary Manufacturing PMI for June remained at 51.0, indicating moderate expansion. Meanwhile, the Services PMI recorded a slight increase to 51.3 from 50.6, and the Composite PMI increased to 51.2 from 50.5. Although the data showed that economic activity is still growing, external tensions remain the main factor weighing on the AUD.
Against a backdrop of geopolitical tensions and global market uncertainty, the AUD is expected to continue to face pressure in the near-term. Investors are now waiting for further responses from Iran and additional diplomatic or military moves from the US and its allies. Meanwhile, additional economic data from the US this week—including PMIs and existing home sales—will also influence the direction of the AUD/USD.
Source: Newsmaker
