Aussie Climbs as Geopolitical Easing Pressures USD

Written by Sandra Leggero

Sandra Leggero has a background in financial markets, having spent more than 9 years in commodities trading for several European and Asian companies. She holds a degree in Economics from the University of Pavia and specializes in emerging markets.

, | Updated: June 15, 2026

Key Moments

AUD/USD trades near 0.7080 during Asian hours on Monday, up about 0.5% after modest losses in the prior session.
Markets largely dismiss the prospect of an RBA move at Tuesday’s June meeting and scale back expectations for an August rate hike.
CME FedWatch shows the implied probability of a Fed rate increase in December at nearly 27%, down from 40% a week earlier.

Risk-On Tone Supports AUD as Central Bank Bets Recede

AUD/USD is advancing during Asian trading on Monday, with the pair up around 0.5% and hovering near 0.7080 after posting small declines the previous day. The move comes even as investors scale back expectations for tighter policy from the Reserve Bank of Australia (RBA).

Market pricing indicates little conviction that the RBA will adjust rates at its June meeting on Tuesday, and positioning for a potential move in August has also been trimmed. Market participants are now focused on May CPI figures due on June 24, which policymakers are expected to scrutinize for signs of persistent inflation that could justify future policy tightening.

US Dollar Softens on US-Iran Agreement and Lower Safe-Haven Demand

The Australian Dollar is drawing additional support from a weaker US Dollar, as appetite for safe-haven assets has diminished following news that the United States and Iran reached an agreement to end their conflict. The reduction in geopolitical tensions has eased concerns about inflation and the possibility of higher interest rates, pressuring the USD.

According to statements from Washington and Tehran on Sunday, the agreement is set to take effect on Friday. US President Donald Trump said that the United States will lift its naval blockade on Iranian ports and that the Strait of Hormuz will reopen after the agreement is signed.

Following the announcement, the CME FedWatch tool shows that the market-implied probability of a US Federal Reserve rate hike in December this year is now nearly 27%, compared with 40% one week earlier.

International Response and Sanctions Outlook

The United Kingdom, France, Germany and Italy indicated that they are prepared to lift sanctions on Iran in response to actions related to its nuclear program after the United States and Iran agreed to end their war.

Event / Indicator	Detail
AUD/USD performance	Up around 0.5%, trading near 0.7080 during Asian hours on Monday
RBA policy expectations	Markets see no rate move at Tuesday’s June meeting; reduced odds of an August hike
Key Australian data in focus	May CPI release on June 24 watched for signs of ongoing inflation
Fed rate hike probability (December)	Nearly 27%, down from 40% a week ago, per CME FedWatch
US-Iran agreement	Deal to end conflict, effective Friday; lifting of US naval blockade and reopening of Strait of Hormuz after signing

Fundamental Drivers of the Australian Dollar

One of the main influences on the Australian Dollar is the level of interest rates set by the RBA. As Australia is a resource-rich economy, the price of its primary export, Iron Ore, also plays an important role. Additional factors include inflation in Australia, its economic growth rate, and the country’s Trade Balance. Market sentiment is another key driver: a risk-on environment tends to support the AUD, while risk-off conditions generally weigh on the currency.

Impact of RBA Policy Decisions

The RBA affects the Australian Dollar through its control over short-term interest rates at which Australian banks lend to one another, which then feed through to borrowing costs across the economy. The central bank targets an inflation range of 2-3% and adjusts rates higher or lower to help maintain that objective. Relatively higher interest rates compared to other major central banks typically underpin the AUD, while relatively lower rates tend to be negative for the currency.

The RBA can also employ quantitative easing or tightening to influence credit conditions. Quantitative easing is generally viewed as negative for the AUD, while quantitative tightening is usually supportive.

China, Iron Ore, and Trade Balance Effects

China, as Australia’s largest trading partner, has a substantial influence on the Australian Dollar. Strong Chinese economic activity usually translates into greater demand for Australian raw materials, goods, and services, lifting demand for AUD. Conversely, weaker-than-expected Chinese growth often puts pressure on the currency. Surprises in Chinese growth data can therefore have a direct impact on AUD and its currency pairs.

Iron Ore, Australia’s largest export, is another critical factor. When Iron Ore prices rise, demand for AUD typically increases, supporting the currency and improving the likelihood of a positive Trade Balance. Falling Iron Ore prices usually have the opposite effect.

The Trade Balance itself – the difference between export revenues and import costs – is a further determinant of AUD performance. A positive Trade Balance tends to strengthen the Australian Dollar due to excess demand from foreign buyers of Australian exports, while a negative balance can weigh on the currency.