Forex News
- AUD/USD softens to near 0.6915 in Tuesday’s early Asian session.
- US begins new Iran strikes; Trump plans a 20% Hormuz charge.
- Westpac signaled an interest rate hike in the RBA’s August policy meeting.
The AUD/USD pair trades with mild losses around 0.6915 during the early Asian session on Tuesday. Ongoing geopolitical tensions in the Middle East continue to boost a safe-haven currency such as the US Dollar (USD) against the Australian Dollar (AUD). All eyes will be on the US June Consumer Price Index (CPI) inflation data, which is due later on Tuesday.
The US announced a new round of strikes on Iran on Monday, hours after US President Donald Trump said Washington is “reinstating” a blockade on Iran in the Strait of Hormuz and will charge other ships for safe passage.
Early Tuesday, the United Arab Emirates (UAE) Ministry of Defence said that two national tankers, the Mombasa and Al Bahiyah, were targeted by two Iranian cruise missiles in the southern lane of the Strait of Hormuz, in Omani territorial waters, per Reuters. Signs of escalating tensions in the Middle East could provide some support to the Greenback, a safe-haven asset, and act as a headwind for the pair.
Westpac analysts said that further interest rate increases remain on the table, with the major bank forecasting the Reserve Bank of Australia (RBA) may need to lift the cash rate again as early as August as inflation risks persist.
The Australian central bank has implemented three interest rate increases of 25 basis points (bps) so far this year, lifting the Official Cash Rate (OCR) to 4.35%. Current ASX 30-day Interbank Cash Rate Futures indicated a minor 16% market expectation of a rate hike to 4.60% at the upcoming August meeting.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
The United Arab Emirates (UAE) Ministry of Defence said that two UAE national tankers, the Mombasa and Al Bahiyah, were targeted by two Iranian cruise missiles in the southern lane of the Strait of Hormuz, in Omani territorial waters, Reuters reported on Tuesday. The source added that one Indian crew member was killed and eight others were wounded.
The UAE condemned what it called a "blatant attack" and said the country retained "its full right to respond to this escalation." The ministry further stated that the UAE remained fully prepared to deal with any threats and was taking all necessary measures to respond firmly to any attempts to undermine the country's security and stability.
Market reaction
Crude oil prices attract some buyers following this headline. At the time of writing, the West Texas Intermediate (WTI) is up 10.40% on the day at $78.85.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- Gold price slumps to around $3,995 in Tuesday’s early Asian session.
- Trump reinstated the Iran port blockade and vowed a 20% charge on cargo passing through Hormuz.
- The US June CPI inflation report will take center stage later on Tuesday.
Gold price (XAU/USD) remains under selling pressure near $3,995 during the early Asian session on Tuesday. The precious metal extends its downside as renewed US-Iran tensions keep inflationary pressures high. Traders await the release of the US June Consumer Price Index (CPI) inflation report and Federal Reserve (Fed) Chair Kevin Warsh testifies later on Tuesday.
Bloomberg reported on Monday that US President Donald Trump reinstated the US blockade of Iranian ships transiting the Strait of Hormuz and demanded a 20% reimbursement on all other cargo shipped through the waterway. Trump added that the US would keep up attacks on Iran, saying that “we’re going to hit them very hard tonight, and we’re going to hit them hard tomorrow.”
A reinstatement of the blockade on Iranian ports may prompt Tehran to step up attacks on ships seeking to transit the Strait of Hormuz. This, in turn, could trigger energy-driven inflation concerns and force the Fed to maintain its higher-for-longer rate stance. It’s worth noting that Gold is often used amid geopolitical uncertainty but does not yield interest, making it less attractive when interest rates are high.
The US CPI inflation data will be in the spotlight later in the day. Analysts expect the headline CPI to decline by 0.1% MoM in June, while the core CPI is projected to show a rise of 0.3% during the same period. In case of a softer-than-expected outcome, this could weigh on the US Dollar (USD) and support the USD-denominated commodity price in the near term.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway said on Tuesday that the central bank is not discussing a shift to a tightened policy stance, adding that inflation is to return to 2% over the medium term.
Key quotes
Middle East conflict complicates monetary policy like all supply shocks.
Grasping firm responses to cost shocks key to maintaining low, stable inflation.
Despite lower oil prices, shock effects to linger in economy.
Middle East developments last week indicate upside risks to September quarter forecast.
Monetary policy can stop initial price impacts from turning into ongoing inflation pressure.
Medium-term inflation expectations stay firmly anchored.
Extra capacity in economy likely to curb pass-through.
Additional easing of monetary stimulus probably needed.
Central bank will act if inflation from Middle East conflict proves persistent.
MPC reached consensus last week, no vote needed.
We are not discussing shift to tightened policy stance.
Inflation to return to 2% over medium term.
Recent PMI data upbeat, lifted our GDPNow projection.
Market reaction
At the press time, the NZD/USD pair is down 0.09% on the day to trade at 0.5756.
RBNZ FAQs
The Reserve Bank of New Zealand (RBNZ) is the country’s central bank. Its economic objectives are achieving and maintaining price stability – achieved when inflation, measured by the Consumer Price Index (CPI), falls within the band of between 1% and 3% – and supporting maximum sustainable employment.
The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC) decides the appropriate level of the Official Cash Rate (OCR) according to its objectives. When inflation is above target, the bank will attempt to tame it by raising its key OCR, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the New Zealand Dollar (NZD) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken NZD.
Employment is important for the Reserve Bank of New Zealand (RBNZ) because a tight labor market can fuel inflation. The RBNZ’s goal of “maximum sustainable employment” is defined as the highest use of labor resources that can be sustained over time without creating an acceleration in inflation. “When employment is at its maximum sustainable level, there will be low and stable inflation. However, if employment is above the maximum sustainable level for too long, it will eventually cause prices to rise more and more quickly, requiring the MPC to raise interest rates to keep inflation under control,” the bank says.
In extreme situations, the Reserve Bank of New Zealand (RBNZ) can enact a monetary policy tool called Quantitative Easing. QE is the process by which the RBNZ prints local currency and uses it to buy assets – usually government or corporate bonds – from banks and other financial institutions with the aim to increase the domestic money supply and spur economic activity. QE usually results in a weaker New Zealand Dollar (NZD). QE is a last resort when simply lowering interest rates is unlikely to achieve the objectives of the central bank. The RBNZ used it during the Covid-19 pandemic.
Commerzbank’s Dr. Henry Hao argues China’s housing downturn, now in its fifth year, is settling into an L-shaped stagnation with a pronounced K-shaped regional divergence. The report highlights persistent weakness in developer funding, construction starts and demand, despite localized stabilization in Tier-1 cities. Structural headwinds from demographics and policy constraints suggest China’s real estate sector will remain a drag on growth for years.
L-shaped stagnation with K-shaped split
"The question we aim to answer in this insight is whether the downturn is finally approaching an inflection point. Recent data from the first half of the year indicates a localized stabilization in top-tier cities. While some analysts point to this as a sign of a housing recovery, we take a different view and see China’s real estate sector as locked into a prolonged period of stagnation."
"Inventory pressure is the clearest sign of regional divergence. Top-tier cities are gradually working through excess supply, with average absorption periods in Tier-1 and Tier-2 cities falling to 21 months and 27 months, respectively, as of May 2026. By contrast, lower-tier cities remain burdened by tens of millions of unsold units, with an average absorption period of about 84 months, or roughly seven years."
"In 2026 H1, total funds available to real estate developers contracted by 18% yoy (Chart 5). The primary source of funds for developers traditionally came from pre-sales and mortgages. With buyers retreating, this revenue stream has dried up."
"This brings us to housing starts. New construction starts have dropped to a mere 24% of their July 2021 level. This is the most forward-looking indicator of developer sentiment."
"In conclusion, we maintain our view that China's real estate sector is locked into an L-shaped trajectory. The market is settling into a permanent, downsized baseline. This L-shaped recovery is accompanied by a severe K-shaped divergence."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
OCBC strategists Sim Moh Siong and Christopher Wong note that Barisan Nasional’s strong win in Johor reinforces UMNO’s political momentum but leaves federal policy continuity intact, limiting immediate implications for the Malaysian Ringgit (MYR). They highlight two-way risks for USD/MYR, with bearish daily momentum, support around 4.0540–4.0320 and resistance at 4.0810 and 4.0980, while flagging potential uncertainty from upcoming Negeri Sembilan elections.
Political outcomes and technical levels
"Barisan Nasional retained Johor with a commanding 48 of 56 seats, up from 40 previously, while Pakatan Harapan secured the remaining eight. A BN victory was widely expected, although the scale of the win reinforces UMNO’s political momentum and bargaining position within the federal unity government."
"The implication for MYR should be largely limited as the result preserves policy continuity in Johor and does not affect the federal government’s parliamentary majority. However, PH’s underperformance may add to coalition strains and speculation over an earlier general election."
"Focus now shifts to the elections in Negeri Sembilan on 1 Aug, where another setback for PH may add modestly to near term uncertainty around MYR. Spot last closed at 4.0730 levels. "
"Bearish momentum on daily chart intact while RSI was flat. 2-way risks likely for now. Support at 4.0540/610 levels (200 DMA, 38.2% fibo retracement of 2026 low to high), 4.0320 (50% fibo). Resistance at 4.0810 (21 DMA), 4.0980 (23.6% fibo)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
OCBC strategists Sim Moh Siong and Christopher Wong note that Barisan Nasional’s strong win in Johor reinforces UMNO’s political momentum but leaves federal policy continuity intact, limiting immediate implications for the Malaysian Ringgit (MYR). They highlight two-way risks for USD/MYR, with bearish daily momentum, support around 4.0540–4.0320 and resistance at 4.0810 and 4.0980, while flagging potential uncertainty from upcoming Negeri Sembilan elections.
Political outcomes and technical levels
"Barisan Nasional retained Johor with a commanding 48 of 56 seats, up from 40 previously, while Pakatan Harapan secured the remaining eight. A BN victory was widely expected, although the scale of the win reinforces UMNO’s political momentum and bargaining position within the federal unity government."
"The implication for MYR should be largely limited as the result preserves policy continuity in Johor and does not affect the federal government’s parliamentary majority. However, PH’s underperformance may add to coalition strains and speculation over an earlier general election."
"Focus now shifts to the elections in Negeri Sembilan on 1 Aug, where another setback for PH may add modestly to near term uncertainty around MYR. Spot last closed at 4.0730 levels. "
"Bearish momentum on daily chart intact while RSI was flat. 2-way risks likely for now. Support at 4.0540/610 levels (200 DMA, 38.2% fibo retracement of 2026 low to high), 4.0320 (50% fibo). Resistance at 4.0810 (21 DMA), 4.0980 (23.6% fibo)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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