AUD/USD is showing upward momentum, reaching approximately 0.7160 during the early hours of Wednesday’s Asian session. Trump announced that the United States is prolonging the ceasefire with Iran following a request from Pakistan. Anticipations are building that the RBA will implement an additional rate hike in response to escalating fuel prices and inflationary pressures. The AUD/USD pair is currently positioned in positive territory, hovering around 0.7160 during the Asian trading session on Wednesday.
Nonetheless, the possible gains for the pair could be constrained due to the ambiguity surrounding Iran’s involvement in upcoming peace negotiations. On Tuesday, US President Donald Trump announced the extension of the ceasefire with Iran as he awaits a “unified proposal” from Tehran. Trump also indicated that he would uphold a blockade on vessels traveling to and from Iran in the Strait of Hormuz, while extending the ceasefire until Iran presented a new proposal, “and discussions are concluded, one way or the other.” Remarks from Federal Reserve Chair nominee Kevin Warsh on independent monetary policy bolster the USD’s strength.
Warsh stated on Tuesday that he had not made any commitments to Trump regarding interest rate cuts, as he sought to reassure US senators considering his confirmation to lead the Fed that he would operate independently of the White House while advocating for comprehensive reforms. The Reserve Bank of Australia has indicated that developments in the Middle East have led to oil price increases, which pose a risk of driving inflation up to 6%.
Current market expectations indicate a nearly 77% likelihood of an RBA rate increase in the upcoming month, following Deputy Governor Andrew Hauser’s reaffirmation of the commitment to controlling inflation. Market participants will monitor the preliminary readings of the S&P Global Purchasing Managers’ Index from Australia and the US, scheduled for release on Thursday.