The Australian dollar held below $0.690, hovering near a three‑month low, as investors further dialed back expectations for additional interest rate hikes and weaker trade data dampened sentiment. Australia unexpectedly recorded an AUD 3.02 billion trade deficit in May, its largest since December 2015, with exports falling to a four‑month low while imports rose to a new record high.
Markets have also reduced the likelihood of further policy tightening amid easing global inflation risks, after the reopening of the Strait of Hormuz pushed oil prices back to pre‑war levels. The probability of an August rate hike by the Reserve Bank is now seen at just 15%, and markets assign roughly a 50% chance that the tightening cycle is already over.
At the same time, the Aussie remained under pressure from a broadly stronger US dollar, as investors continued to factor in a potential Federal Reserve rate increase in September, despite Fed Chair Kevin Warsh noting that inflation expectations had eased over the past month.
