The Australian dollar rebounds from a fresh monthly low near 0.7115 as the USD pulls back, though geopolitical tensions limit gains.
The AUD/USD pair erased earlier losses, climbing from a monthly low of 0.7115 to modest gains during the European session. The recovery follows a retreat in the USD, as traders booked profits after a week-long rally, triggering short-covering in the pair.
Despite the rebound, the fundamental outlook remains cautious. The USD’s pullback is tempered by rising geopolitical risks, including a drone strike in the UAE and escalating US-Iran tensions. Markets also price in higher odds of a Fed rate hike, supporting the greenback.
Oil prices rose to a two-week high amid the Middle East turmoil, reigniting inflation concerns. The AUD’s upside remains capped as investors weigh the impact of geopolitical uncertainty on risk sentiment.