FX.co ★ Australian Dollar Holds Firm

The Australian dollar traded steadily around $0.694, holding on to last week’s 0.7% advance, supported by a weaker US dollar and expectations of further interest rate increases from the Reserve Bank of Australia (RBA). Investors continued to parse the RBA’s June meeting minutes, which highlighted policymakers’ pronounced concerns about stubbornly high inflation, excess demand, and capacity constraints. Major banks echoed this view: Commonwealth Bank of Australia noted that the minutes underscored persistent inflationary pressures, while ANZ cautioned that they reinforced the risk of an additional rate hike in the coming months.

At the same time, the US dollar came under pressure as energy prices eased and US payroll data came in softer than expected. This prompted markets to temper expectations of an imminent Federal Reserve rate increase, with futures implying a 78% probability that rates will be left unchanged at the July 29 meeting. Elsewhere, US-Iran peace talks made no headway, though shipping traffic through the Strait of Hormuz continued without disruption.