What’s happening: The Australian dollar recorded gains against the US dollar on Monday, as investors continued monitoring geopolitical tensions in the Middle East.
What happened: Strong demand for commodity currencies amid escalating tensions between Israel and Iran lent support to the Australian dollar.
Investors also digested mixed economic data from China, Australia’s closest trading partner, on Monday.
Why it matters: The Australian dollar had been under pressure last week due to some disappointing economic data, including downbeat GDP growth for the first quarter and cautious consumer spending.
Israel and Iran continued to conduct airstrikes over the weekend and on Monday. US President Donald Trump voiced his support for Israel and said Iran should enter negotiations “before it is too late.” Hopes of Iran’s willingness to end the conflict and resume nuclear negotiations with the US lifted market sentiment.
The Australian dollar rose after reports of Iran asking countries like Oman, Qatar, and Saudi Arabia to urge Trump to ask Israel for a ceasefire.
Australia’s closest trade partner, China, released mixed economic reports on Monday, signalling an uneven economic recovery. New home prices across key Chinese cities fell 3.5% year-on-year in May, declining for the 23rd month in a row, while industrial production softened. China’s retail sales grew by 6.4% year-over-year in May, accelerating from 5.1% in the previous month and topping market expectations of 5%.
Weakness in the US dollar also lent support to the AUD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.2% to 98.00 on Monday.
The AUD/USD pair surged to 0.6523 on Monday.
What to watch: Investors await the release of Australia’s labour market reports on Thursday. Employment in Australia, which rose by 89,000 in April to a fresh record of 14.64 million, is expected to rise by 25,000 in May. Full-time employment which surged by 59,500 to 10.1 million in April, is projected to increase by 20,0000 in May. Analysts expect Australia’s unemployment rate to remain unchanged at 4.1%.
Markets will also monitor the Reserve Bank of Australia’s interest rate decision, scheduled for Thursday. Investors widely expect the RBA to announce a rate cut.
Context: US equity markets settled higher on Monday, with the Dow Jones index jumping more than 300 points.
Details: Wall Street started the week on a positive note, as oil prices declined after recording sharp gains last week. Crude production remaining so far unaffected by the Iran-Israel war eased market concerns over higher energy prices and overall inflation.
Data released on Monday showed the New York Empire State Manufacturing Index fell to -16 in June, from a reading of -9.2 in May. The figure also missed market projections of -5.5. The latest reading was also the weakest since March’s two-year low level of -20.
The Federal Reserve is scheduled to announce its monetary policy decision on Wednesday and investors expect policymakers to keep interest rates unchanged.
Technology and communication services stocks were among the top performers on Monday, while utilities bucked the overall market trend.
The Philadelphia SE Semiconductor index climbed around 3.03%, after shares of Advanced Micro Devices jumped 8.8%. The company has announced acquisitions and strategic partnerships to strengthen its position in the AI and datacentre markets.
Shares of US Steel surged more than 5% after Trump announced an approval for Nippon Steel’s $14.9 billion offer for the company.
The Dow Jones index jumped 317.30 points, or 0.75%, to close at 42,515.09 on Monday. The S&P 500 surged 0.94% to 6,033.11, while the Nasdaq 100 climbed 1.42% to settle at 21,937.57.
What to watch: Investors await the release of economic data on US retail sales (1630 UAE Time), industrial production (1715 UAE Time) and NAHB housing market index (1800 UAE Time) today. US retail sales, which grew by 0.1% in April, are expected to decline by 0.7% in May.
Analysts expect industrial production to rise 1.1% year-over-year in May, following 1.5% growth in the previous month, while the NAHB/Wells Fargo Housing Market Index is projected to rise to a reading of 36 in June, from 34 in May.
Other Markets: European trading indices closed higher on Monday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 index up by 0.28%, 0.78%, 0.75% and 0.36%, respectively.
Iran said it is preparing for the largest missile attack in history, after Israel struck an Iranian state-run television station. The news sent WTI crude prices to $72.18 this morning.
US President Donald Trump is scheduled to meet Ukrainian President Volodymyr Zelenskyy for bilateral negotiations. The news sent the safe-haven US dollar index higher in forex trading this morning.
India’s total passenger vehicle sales grew by 0.8% year-over-year to 303,099 units in May, easing from a 5.5% surge in the previous month, which exerted pressure on the INR/USD forex pair.
US President Donald Trump announced an agreement to reduce certain tariffs on UK imports. However, unresolved issues on steel and aluminum imports exerted pressure on the GBP/USD forex pair.
New Zealand’s annual food inflation rose to 4.4% in May, from 3.7% in the previous month. The region’s inflation reading accelerating to its highest mark since December 2023 sent the NZD/USD pair lower in forex trading this morning.
Eurozone’s ZEW economic sentiment index (1300 UAE Time), Germany’s ZEW economic sentiment index (1300 UAE Time), ZEW current conditions (1300 UAE Time), 10-year Bund/g auction (1330 UAE Time), 5-year Bobl/g auction (1330 UAE Time) and Bundesbank monthly report (1400 UAE Time), UK’s 5-year Treasury Gilt auction (1300 UAE Time), Canada’s foreign securities purchases (1630 UAE Time) and Bank of Canada’s summary of deliberations (2130 UAE Time), as well as US export prices (1630 UAE Time), import prices (1630 UAE Time), Redbook index (1655 UAE Time), capacity utilization (1715 UAE Time), manufacturing production (1715 UAE Time), business inventories (1800 UAE Time), and 5-year TIPS auction (2100 UAE Time).