Renewed US-Iran military strikes weigh on risk assets, while upcoming US inflation data adds to market uncertainty.
The Australian Dollar declined to 0.6940 against the USD in early Asian trading, pressured by escalating Middle East tensions. The US launched strikes against Iran on Sunday, prompting retaliatory attacks on American allies in the region.
Traders are also awaiting Tuesday’s US Consumer Price Index data, which could influence Federal Reserve policy expectations. The Reserve Bank of Australia’s hawkish stance may provide some support, with markets pricing a 19% chance of a 25 basis point rate hike in August.
The RBA has raised rates three times this year, bringing the Official Cash Rate to 4.35%. Recent comments from RBA officials suggest further tightening remains possible if inflation expectations rise due to oil price shocks.