Geopolitical tensions and upcoming US sanctions on Iran support the USD, while Fed rate hike bets limit its upside against the Australian dollar.
The AUD/USD pair remains near its highest level since early June, trading above 0.7150 in early European trading. Investors await US Treasury Secretary Scott Bessent’s announcement of what he calls the toughest sanctions on Iran, escalating Middle East tensions.
Iran has threatened to halt oil exports through the Strait of Hormuz if sanctions proceed, keeping geopolitical risks elevated. However, softer US inflation data for July has reduced expectations for near-term Fed tightening, while lower US bond yields further weigh on the USD.
Markets are pricing in over a 70% chance of at least one Fed rate hike by year-end, with focus shifting to upcoming US Personal Consumption Expenditures data for further direction.