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- AUD/USD softens to around 0.7005 in Monday’s early European session.
- Uncertainty clouded the US-Iran peace deal following threats from Trump.
- RBA hawkish pause could underpin the Aussie.
The AUD/USD pair loses traction to near 0.7005 during the early European trading hours on Monday, pressured by risk-off sentiment. Traders continue to assess the developments surrounding the US-Iran peace deal following fresh threats from US President Donald Trump.
The US-Iran peace talks took place on Sunday in Bürgenstock, Switzerland, with delegations from Iran, the US, Qatar, and Pakistan participating. On Monday, Qatar and Pakistan issued a joint statement on the conclusion of negotiations, saying that talks were conducted in a positive, constructive atmosphere.
Earlier on Monday, the Tasnim news agency cited an Iranian Foreign Ministry spokesman as saying that “a formal transit mechanism was successfully arranged to guarantee the safe passage of commercial vessels through the vital Strait of Hormuz waterway.”
However, markets remain cautious since Trump over the weekend threatened strikes on Iran if Hezbollah keeps attacking Israel. Uncertainty surrounding the US-Iran peace agreement could weigh on the riskier asset, such as the Australian Dollar (AUD) against the US Dollar (USD).
On the other hand, a hawkish interest rate hold from the Reserve Bank of Australia (RBA) might help limit the Aussie’s losses. The RBA decided to leave the Official Cash Rate (OCR) unchanged at 4.35% after its June monetary policy meeting last week. This is a pause following three consecutive 25 basis points (bps) rate hikes earlier this year.
Despite leaving the interest rate unchanged, the board members signaled that further rate hikes might be necessary to achieve its goals.
