AUD rebounds after early risk-off crash yet remains vulnerable to evolving geopolitical tensions
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Daily Currency Update
The Australian dollar tumbled through trade on Monday, sliding below US$0.64, as markets reacted to the US strikes on Iranian nuclear sites over the weekend. The AUD marked a 6-week low, touching US$0.6374, amid the early risk-off move and USD rally. News of the US entering the conflict spooked markets and forced a flight to safety, driving the AUD lower. Since the initial US strikes, Israel and Iran have continued to fire missiles at each other while the US has stepped back and had no further involvement. Iran fired toward a US base in Qatar overnight, but the move was preceded by a warning, and the base had largely been evacuated before the missiles were intercepted.With no further strikes launched, tensions eased and risk sentiment improved, allowing the AUD to climb back above US$0.6450. With the US dollar sharply lower overnight, the AUD opens higher this morning, yet is a notable underperformer when compared against other majors.
Our attention today remains squarely affixed on Middle Eastern geopolitical tensions while Canadian CPI, US consumer confidence and German IFO business data headline the macro ticket.
Key Movers
There has been plenty to digest over the last 24 hours, with sentiment shifting in response to the ever-evolving Israel-Iran conflict. After the initial risk-off move on open, the USD moved sharply lower through overnight trade on Monday as the US stepped away from further involvement. Market sentiment improved after Iran’s retaliatory strikes were intercepted, and no further attempts were made on key oil transport routes and production sites.While Iran launched missiles toward a US air base in Qatar, the base had been largely evacuated over the weekend, and the strikes were preceded by a warning allowing Qatar to clear its airspace and for the US to intercept the missiles. The market's primary concern has been Iran striking sites that would disrupt the flow of oil through the Strait of Hormuz. With no sign Iran is planning further strikes that may target oil infrastructure, oil prices corrected lower, and the risk-off mood flipped.
European currencies have outperformed, and the yen was flat over the last 24 hours. Japan’s exposure to higher oil prices outweighed its appeal as a haven asset, and after tumbling to 148, it opens this morning back near 146. Direction will continue to be driven by the Israel-Iran conflict, with Canadian CPI, US Consumer confidence and German business survey providing macroeconomic colour.
Expected Ranges
- AUD/USD: 0.6350 - 0.6530 ▲
- AUD/EUR: 0.5550 - 0.5650 ▼
- GBP/AUD: 2.0800 - 2.1200 ▲
- AUD/NZD: 1.0780 - 1.0850 ▼
- AUD/CAD: 0.8800 - 0.8950 ▲