07.08.202602:02:05UTC+00Australian Dollar Set for Muted Week

The Australian dollar slipped to around $0.70, retreating from a seven-week high and heading toward a flat finish for the week, as renewed tensions in the Middle East weighed on risk sentiment. The US dollar strengthened, and oil prices rose following reports of Iranian attacks in the Strait of Hormuz and ongoing uncertainty over an agreement to reopen the key shipping route. Higher energy prices reignited inflation concerns and reinforced expectations that global interest rates may stay elevated for longer.

In Australia, after three rate hikes so far this year, markets are now pricing in virtually no chance of an increase at next week’s Reserve Bank monetary policy meeting, following softer-than-expected second-quarter inflation data. Investors also see little likelihood of a move in September, while assigning roughly a 60% probability to a rate hike in November, contingent on third-quarter inflation coming in stronger than expected.