AUD/USD is showing an upward movement even though market participants are dismissing the possibility of any interest rate changes on Tuesday. The US Dollar has experienced a decline as the prospects of a US-Iran peace deal diminished, leading to a reduction in safe-haven demand. This shift has contributed to easing concerns regarding inflation and the potential for higher interest rates. The CME FedWatch tool indicates that the likelihood of a December Fed rate hike has decreased to approximately 27% following the peace deal. AUD/USD experiences an increase of approximately 0.5% following slight declines the day before, currently trading near 0.7080 during the Asian session on Monday.
However, the Australian Dollar could struggle against the US Dollar as markets are ruling out a Reserve Bank of Australia rate move at Tuesday’s June meeting and have lowered bets for an August hike. Attention is now focused on the May CPI data set to be released on June 24. This information will be crucial for decision-makers seeking indications of ongoing inflation that could warrant future adjustments in policy. The AUD/USD pair appreciates as the US Dollar declines on fading safe-haven demand following reports that the United States and Iran reached a deal to end their conflict, easing concerns about inflation and higher interest rates. Washington and Tehran announced on Sunday that they have finalised an agreement set to take effect on Friday.
US President Donald Trump announced that the United States is removing its naval blockade on Iranian ports, indicating that the Strait of Hormuz will be reopened following the signing of the agreement. The United Kingdom, France, Germany, and Italy have indicated their readiness to lift sanctions on Iran, contingent upon the country’s actions regarding its nuclear program, following a deal reached between the US and Iran to conclude their conflict. The CME FedWatch tool shows that the markets are currently estimating a nearly 27% likelihood of a US Federal Reserve interest rate hike in December this year following the peace deal, a decrease from 40% just a week prior.