FX.co ★ Australian Dollar Hits 3-Week Top

The Australian dollar strengthened to about $0.698, its highest level in more than three weeks, as softer-than-expected US inflation data pressured the greenback and tempered expectations of further interest rate increases by the Federal Reserve.

Markets largely shrugged off renewed US–Iran tensions after President Donald Trump threatened additional strikes and reinstated a US blockade on Tehran. Instead, risk sentiment improved following Washington’s decision to scrap a proposed levy on cargoes transiting the Strait of Hormuz.

Domestically, expectations for further policy tightening in Australia remained muted after the Reserve Bank’s three rate hikes since February. Futures markets currently assign only about a 20% probability to another rate hike in August, rising to roughly 60% by December.

Recent business surveys indicated that operating conditions stayed soft in June, with cost pressures easing somewhat. At the same time, consumer confidence posted a modest improvement in July, though it is likely to come under renewed strain amid rising fuel prices.