The Australian dollar remained below $0.705, hovering around a nine-week low as ongoing tensions in the Middle East continued to dampen global risk appetite. The conflict escalated after the US launched new strikes on Iran, with President Trump accusing Tehran of shooting down a helicopter in the Strait of Hormuz, further undermining an already fragile ceasefire. This latest flare-up pushed energy prices higher, stoking inflation concerns and heightening the risk of additional central bank rate hikes worldwide.
Domestically, Australian consumer sentiment deteriorated further in June as inflation and rising fuel costs continued to squeeze household budgets. Attention now turns to the Reserve Bank of Australia’s policy meeting next week, where interest rates are widely expected to be kept on hold. Governor Bullock reiterated last week that the RBA remains strongly committed to bringing inflation back under control, following three rate increases earlier this year. Meanwhile, economists have pared back expectations of a move in August and now anticipate the cash rate will peak at 4.35%.
