The Australian dollar climbed to around $0.695 but was poised to end the week little changed, as investors tracked developments in the Strait of Hormuz amid renewed tensions in the Middle East. The safe-haven US dollar firmed and oil prices advanced after the US and Iran conducted military strikes in the Gulf earlier in the week. Still, both countries are now expected to resume peace talks despite the recent escalation.
Separately, the International Monetary Fund cut its 2026 growth forecast for Australia to 1.9% from 2.0% and cautioned that inflation is likely to remain elevated at about 4% this year. The Reserve Bank of Australia meets in August and is widely anticipated to leave the cash rate unchanged at 4.35%, although markets are still pricing in roughly a 60% probability of one final rate increase later this year, contingent in part on oil price developments. Traders are also awaiting key employment and inflation releases due later this month, which could provide further guidance on the policy outlook.
