Australian Dollar declines below 0.6950 as US, Iran launch new round of strikes
The AUD/USD pair loses ground to near 0.6940 during the early Asian session on Monday. Renewed tensions in the Middle East weigh on the riskier assets such as the Australian Dollar (AUD) against the US Dollar (USD). Traders brace for the release of the US Consumer Price Index (CPI) inflation data, which is due later on Tuesday.
Bloomberg reported that the US Central Command (CENTCOM) launched a new strikes against Iran on Sunday aimed at further weakening the Islamic Republic’s ability to strike civilian vessels transiting the Strait of Hormuz. The Islamic Revolutionary Guard Corps (IRGC) then launched retaliatory drone and missile assaults on American allies across the Middle East, including Kuwait, Jordan and Qatar.
On the other hand, hawkish rhetoric from the Reserve Bank of Australia (RBA) might help limit the Aussie’s losses. RBA Assistant Governor Sarah Hunter said last week that the board will act as needed to return inflation to its target, warning some tightening may be required if the oil shock lifts inflation expectations, per Reuters.
The Australian central bank has implemented three interest rate increases of 25 basis points (bps) so far this year, lifting the Official Cash Rate (OCR) to 4.35%. Current ASX 30-day Interbank Cash Rate Futures indicated a minor 19% market expectation of a rate hike to 4.60% at the upcoming August meeting.
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