AUD/USD declines as a robust US Dollar takes advantage of increasing hawkish sentiment surrounding the Federal Reserve’s policy outlook. The CME FedWatch tool suggests that traders are currently assigning a probability of nearly 60% to a Federal Reserve rate hike by September. Trump asserted that discussions between the US and Iran were set to take place on Tuesday in Doha; however, Tehran refuted this claim, stating that there were no planned meetings with Washington. AUD/USD extends its decline for a third consecutive day on Tuesday, trading near 0.6870 during Asian hours. The Australian Dollar remains subdued following the release of the Reserve Bank of Australia’s latest meeting minutes and key Purchasing Managers’ Index data from China.
The RBA June monetary policy meeting minutes indicated that although the board perceives current financial conditions as relatively tight, it stands ready to enact additional rate hikes if deemed necessary to maintain price stability. The central bank emphasised that the current conflict in the Middle East represents a dual challenge to the economic forecast, introducing considerable upward pressures on inflation while simultaneously posing risks to overall growth prospects. On the economic data front, China, Australia’s close trading partner, demonstrated stronger-than-anticipated resilience in June. The official Manufacturing PMI increased to 50.3 from the prior 50.0, surpassing market expectations of 50.1. At the same time, the NBS Non-Manufacturing PMI rose to 50.2 from May’s 50.1, significantly surpassing the consensus expectation of a contractionary 49.9 reading and indicating expansion in both sectors.
The AUD/USD pair is experiencing downward pressure as the US Dollar capitalises on the increasing hawkish sentiment regarding the Federal Reserve’s policy outlook. According to the CME FedWatch tool, traders are currently assigning a probability of nearly 60% to the likelihood of a Fed interest rate hike by September. This shift in sentiment has intensified attention on this week’s crucial US labour market reports, culminating in Thursday’s Nonfarm Payrolls data, which will offer new insights into the Fed’s interest rate trajectory. Forecasters currently project that job growth for June will reach 114,000, while the Unemployment Rate is expected to remain unchanged at 4.3%.
The Greenback is also benefiting from safe-haven demand due to the persistent geopolitical uncertainty regarding US-Iran relations. US President Donald Trump announced that the two nations are scheduled to engage in new discussions on Tuesday in Doha, Qatar, after a weekend marked by hostilities in the Middle East, as reported. Tehran has refuted this assertion, declaring that there are no negotiation meetings planned with Washington at any level. Iran continues to prioritise the execution of its current memorandum of understanding instead of engaging in discussions for a final agreement.