Australian dollar jumps on Israel-Iran cease fire

[Redator]

The Australian dollar is up sharply on Tuesday. In the North American session, AUD/USD is trading at 0.6504, up 0.70% on the day.

Australian dollar jumps as risk appetite improves

Investors' risk appetite is higher today after Israel and Iran agreed to a ceasefire in their 12-day war. The markets have reacted favorably to lower oil prices as fears that Iran would close the Straits of Hormuz, which would have disrupted global oil supplies, have diminished. Risk appetite has returned and risk currencies like the Australian dollar have posted strong gains today.

The Israel-Iran war has triggered sharp swings in oil prices and there are fears of an oil price shock if the fragile ceasefire does not hold. An oil price shock would send petrol prices higher and boost inflation, complicating the Reserve Bank of Australia's plans to lower interest rates.

Australia CPI expected to ease to 2.3%

Australia releases the May inflation report early on Wednesday. Headline CPI has been stuck at 2.4% for three consecutive months, within the Reserve Bank of Australia's target of 2-3% and its lowest level since Nov. 2024. The market estimate for May stands at 2.3%. Trimmed Mean CPI, a key core inflation indication, edged up to 2.8% from 2.7% in April.

The Reserve Bank will be keeping a close eye on the inflation report, with the central bank making a rate announcement on July 8. The RBA trimmed rates by a quarter-point in May and has shifted to a more dovish stance - the Board discussed a jumbo half-point cut at the May meeting.

Fed's Powell to testify on Capitol Hill

Fred Chair Powell appears before Congress today and Wednesday and is likely to defend the Fed's wait-and-see stance. The Fed is concerned about President Trump's tariffs and the Israel-Iran war threatens stability in the Middle East, hardly the recipe for further rate cuts. Still, there appears to be some dissent within the Fed, as two members, Michelle Bowman and Christopher Waller, have suggested that the Fed could lower rates as early as September.

AUD/USD Technical

• AUD/USD is testing resistance at 0.6490. Above, there is resistance at 0.6522
• There is support at 0.6400 and 0.6342

AUDUSD 1-Day Chart, June 24, 2025

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