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- AUD/USD holds losses as US Dollar safe-haven demand rises amid heightened US-Iran tensions and Strait of Hormuz risks.
- A surprising decline of 23,000 Nonfarm Payrolls in July curbed hopes for an immediate interest rate increase by the Fed.
- RBA is widely expected to keep its cash rate unchanged at 4.35% on Tuesday.
AUD/USD inches lower after registering modest gains in the previous day, trading around 0.7060 during the Asian hours on Monday. The pair holds losses as the US Dollar (USD) receives support from broad risk aversion.
Geopolitical tensions remain high as the ongoing United States (US)-Iran conflict enters a critical diplomatic phase, with intense military engagements and strategic pressure surrounding the Strait of Hormuz driving market caution. Although Iranian officials noted on Sunday that Oman-mediated negotiations regarding the management of the strait are making progress, safe-haven demand for the Greenback remains firmly intact.
Weaker-than-expected US employment data has dampened expectations for a near-term Federal Reserve (Fed) rate hike. Nonfarm Payrolls (NFP) unexpectedly dropped by 23,000 in July, while sharp downward revisions to the previous two months highlighted weakening labor market conditions. Investors are now focused on upcoming inflation reports for further clues on monetary policy.
Traders look ahead to the Reserve Bank of Australia’s (RBA) monetary policy decision on Tuesday. The central bank is widely expected to keep its cash rate unchanged at 4.35% for a second straight meeting. Traders will closely watch the RBA’s updated forecasts and Governor Michele Bullock’s comments for clues on the future policy path.
Rabo sees November RBA risk keeping modest upside bias in AUD/USD
Strategists at Rabobank note that, in their view, there is still “risk of one more rate hike this year in November,” with markets likely to look to the RBA’s 11 August policy meeting for “more clarity on rate hike risks.” Against this backdrop, the bank says it continues to “forecast a modest upside bias in AUD/USD out to 12 months,” a view it anchors “mostly on the back of a moderately softer tone in the USD and the view that Fed rate hike expectations are overdone.”
