Australian dollar (AUD) rallies on US-Iran peace agreement
The Australian dollar (AUD) got off to a strong start this week, supported by a notable improvement in market risk appetite.
This was, of course, linked to the prospect of a US-Iran peace deal, which was announced over the weekend.
The Reserve Bank of Australia (RBA) will deliver its latest interest rate decision later today. After three consecutive hikes, the RBA is expected to hold steady this month, with the ‘Aussie’ likely to fall if the bank signals a more cautious approach to monetary tightening going forward.
New Zealand dollar (NZD) climbs in upbeat trade
The New Zealand dollar (NZD) also rallied through Monday’s session as a bullish market underpinned the risk-sensitive currency.
In the absence of any market-moving data, movement in the ‘kiwi’ may remain tied to market risk dynamics today.
Pound (GBP) flat amid by-election jitters
The pound (GBP) traded in a narrow range yesterday as GBP investors turned their attention towards the upcoming Makerfield by-election.
Given the potential political implications of the election, investors were wary of betting too aggressively on Sterling, despite a sharp drop in UK bond yields.
Looking ahead, movement in the pound may remain limited today as markets also brace for the Bank of England’s (BoE) upcoming interest rate decision.
Euro (EUR) firms amid USD weakness
The euro (EUR) appreciated on Monday as demand for the single currency was underpinned by its inverse trade relationship with the US dollar (USD).
Aiding the euro’s ascent were growing bets that the European Central Bank (ECB) will continue to hike interest rates in the months to come.
Coming up, the publication of Germany’s latest ZEW economic sentiment index could apply pressure to the euro today if morale in the Eurozone’s largest economy remained in negative territory this month.
US dollar (USD) slumps on Middle East peace hopes
The US dollar stumbled out of the gates this week after it was announced that the US and Iran had agreed upon a framework for a peace deal.
While positive risk flows sapped demand for the safe-haven currency, the weakness in the dollar was fairly modest, with investors still wary about Israel’s continued military operations in Lebanon.
Expect the USD selling bias to remain in place today so long as nothing derails the peace deal.
Canadian dollar (CAD) retreats as oil prices slump
The Canadian dollar (CAD) also weakened on Monday as a sharp drop in global oil prices sapped demand for the commodity-linked currency.
The ‘loonie’ is likely to extend these losses through today’s session if crude prices continue to slide.
Data releases
14:30 AUD RBA Interest Rate Decision
19:00 EUR German ZEW Economic Sentiment Index (Jun)