AUD slides as nerves frayed amid rising Israel-Iran tensions
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Daily Currency Update
The Australian dollar traded lower Thursday as tensions in the Middle East force investors toward haven assets. Risk sentiment faltered after President Trump indicated the US was considering strikes on Iran within days. Equities and risk assets fell throughout the Asian trading session and the AUD slid off intraday highs just north of US$0.6510 to US$0.6449 before finding support. Our overnight attentions were squarely affixed on further commentary surrounding the US involvement in the conflict and comments from the White House helped ease fears. Press Secretary Leavitt suggested a decision on whether the US would join Israel would be made over the coming weeks, not days, noting “The President see's the potential for negotiation”. The de-escalation helped arrest the risk off move and the AUD has edged back toward US$0.6480/90 leading into this morning’s open. With markets largely ignoring the domestic labour market print, direction will continue to stem from shifts in the underlying risk narrative. Markets are still extremely nervous about the prospect of the US joining the Israel-Iran conflict, leaving the AUD vulnerable to swings in risk sentiment.Key Movers
Price action across majors has again been driven by geo-political tensions with the USD, CHF and JPY all enjoying support amid elevated risk aversion. Fears the US is preparing to join Israel’s strike on Iran remain elevated as markets react to mixed-reports coming from the White House. The message from President Trump yesterday was that he was considering strikes within days, while comments from Press Secretary Leavitt suggest any decision on whether the US weighs in on the conflict will be made over the coming weeks, affording time for negotiations. Market nerves were frayed and risk assets tumbled. The DXY index rallied early before paring gains.In central bank news the Swizz National Bank and Norwegian Norgesbank both cut rates by 25 basis points, while the Bank of England left rates on hold. While we expected the BoE would leave rates at 4.25%, the 6-3 voting split within the Monetary Policy Committee surprised analysts. Many had expected a bigger majority of voting members would support the hold but a growing number of doves pushing for a rate cut helped markets firm bets for two full 25 point cuts before the end of the year. The GBP traded lower following the meeting, but recouped gains amid late USD weakness. Sterling currently sits just south of 1.3475, while the euro found support into the daily close trading back toward 1.15.
With the macro agenda free of tier 1 data, our attentions remain with geo-political headlines.
Expected Ranges
- AUD/USD: 0.6400 - 0.6550 ▼
- AUD/EUR: 0.5580 - 0.5700 ▼
- GBP/AUD: 2.0600 - 2.1000 ▲
- AUD/NZD: 1.0780 - 1.0880 ▲
- AUD/CAD: 0.8820 - 0.8920 ▼