Geopolitical tensions and softer domestic data reduce expectations for a June RBA rate hike, pressuring the Australian Dollar.
The AUD/USD pair retreated to around 0.7180 in early European trading Friday, driven by escalating Middle East tensions that dampened appetite for riskier assets. The Australian Dollar underperformed against the USD as investors sought safety amid reports of missile and drone attacks in Kuwait and ongoing U.S.-Iran negotiations with no clear resolution.
Earlier data showed softer-than-expected Australian inflation and a surprise rise in the jobless rate, cutting bets for a Reserve Bank of Australia rate hike in June. Meanwhile, traders await the U.S. May ISM Manufacturing PMI on Monday and Nonfarm Payrolls on Friday, with economists forecasting a 96K increase in jobs and steady unemployment at 4.3%.
Market focus remains on geopolitical developments and U.S. labor data, as Federal Reserve officials signal potential rate hikes if inflation pressures intensify due to the conflict.