US Dollar Weakens, AUD Seizes Momentum
The AUD/USD pair rose to a daily high at the start of the European session on Monday (July 20th). This strengthening occurred as the US dollar weakened, opening the opportunity for the Australian dollar to retest the psychological 0.7000 level.
Although tensions between the United States and Iran remain elevated, global risk sentiment appears to have improved slightly. This is reflected in positive movements in European stock markets, which have slightly reduced demand for the US dollar as a safe-haven asset.
However, US dollar weakness is expected to remain limited. Geopolitical uncertainty remains high after the US launched its ninth night of attacks on Iran, while Iran retaliated with ballistic missiles and drones targeting US allies in the Middle East.
Rising oil prices due to the US-Iran conflict and the risk of a closure of the Strait of Hormuz have also rekindled inflation concerns. These conditions have led the market to continue expecting the Fed to raise interest rates before the end of the year.
Meanwhile, the Australian dollar received support from the Reserve Bank of Australia's relatively hawkish stance. Furthermore, stable Chinese economic data has also supported the AUD, given Australia's heavy reliance on demand from China.
As for the market impact, AUD/USD still has the potential to strengthen as long as the US dollar weakens and risk sentiment improves. However, gains could be limited if Middle East conflicts escalate, oil prices continue to rise, and expectations of higher US interest rates further strengthen the dollar. (arl)
Source: Newsmaker.id
