Aussie Heads for Heavy Weekly Loss

The Australian dollar fell to around $0.711, touching a two-week low and on track for a weekly drop of roughly 1%, as an ongoing stalemate in Middle East tensions weighed on risk appetite, while the Reserve Bank signaled a wait-and-see approach. The central bank has already delivered three hikes this year, and Governor Michele Bullock said the rate increases are starting to filter through the economy. However, she reiterated that inflation remains elevated and policymakers will remain alert to persistent price pressures. Markets expect the RBA to stand pat in June, with about a 50% odds of another hike in August and full pricing for a move by December. Investors now watch any shift in tone as Deputy Governor Andrew Hauser is due to speak later today, although expectations are he will reinforce a steady policy stance. Broader sentiment was further hit by a fragile US-Iran ceasefire, reports of stalled negotiations, and a pullback in AI-linked trades, weighing on the risk-sensitive AUD.

The Australian dollar held below $0.715, staying near a two-week low as renewed hostilities in the Middle East dampened risk sentiment, while upbeat domestic trade data offered support. Australia's trade position returned to a surplus of AUD 1.79 billion in April from a deficit of AUD 1.02 billion in March, driven by a rebound in iron ore and coal exports, while import growth remained robust. Earlier this week, softer Q1 GDP readings reinforced signs that the Reserve Bank’s three rate hikes this year are cooling demand and helping contain price pressures. However, fresh attacks in the Middle East and near the crucial Strait of Hormuz have kept energy prices elevated, fueling inflation concerns. Investors now await further clues on the policy outlook, with RBA Governor Michele Bullock set to appear before lawmakers later today and Deputy Governor Andrew Hauser scheduled to speak on Friday. Markets have ruled out another rate hike this month, but remain evenly split for a move in August.

The Australian dollar fell to around $0.71, hovering below a recent four-year high as markets weighed the country’s latest GDP figures. The economy grew by just 0.3% in Q1, below expectations of 0.5% and down from 0.9% previously, while annual growth of 2.5% also missed forecasts. The softer readings reinforced signs that higher interest rates are cooling demand, and a key data point policymakers likely to assess ahead of the Reserve Bank’s June 15–16 meeting to determine whether current settings are sufficiently restrictive to bring inflation back to target. The central bank has already hiked rates three times this year in its effort to contain price pressures. This comes against a backdrop of geopolitical tensions linked to the US–Iran conflict, which have pushed up global energy costs and added to external inflation risks. Markets have largely ruled out another rate hike this month, but remain evenly split for a move in August and are nearly fully pricing a 4.60% peak by year-end.