FX.co ★ Australian Dollar Set for 3rd Weekly Gain

The Australian dollar slipped below $0.70 but remained close to a three-week high and on track for a third straight weekly gain, supported by broad weakness in the US dollar even as the escalating Middle East conflict dampened risk appetite. Softer-than-expected US consumer and producer inflation data led markets to scale back expectations of a near-term Federal Reserve rate hike, undermining support for the greenback. However, upside for the Aussie was limited by rising geopolitical risks, as Brent crude has jumped about 17% over the past two weeks on concerns that prolonged disruptions to shipping through the Strait of Hormuz could reignite global inflation and complicate the policy outlook for major central banks. In Australia, expectations for further policy tightening remain muted, with markets pricing in only about a 20% chance of a rate increase in August and roughly 60% odds by December. Upcoming key employment and inflation releases later this month will provide further guidance on the policy outlook.