Aussie Dollar Drops as Hormuz Blockade Reinstated

AUD

The Aussie Dollar opens mixed across the majors as the U.S. announces it will be reinstating the blockade in the Strait of Hormuz and charging a fee of 20% of all cargo shipped. Asian equities were mixed in early trade as the KOSPI saw another circuit-breaker day closing -9.0%, followed by the Nikkei -1.9% and Shenzhen -1.8% while the Hang Seng managed a +0.2% gain. The ASX closed flat on the day with +0.7% gains in financials offsetting -0.7% losses in materials. Later this morning the Westpac Consumer Sentiment and NAB Business Confidence reports are set to release and mark one of the only releases this week locally. China’s export data is also due today and could show growth of around 18% YoY. The export boom, supported by strong AI-related capex demand, should remain the biggest pillar. With markets pricing just 15bps of RBA tightening by year-end and no other domestic data this week, the Aussie remains largely at the mercy of global headlines.

USD

AUDUSD opened lower at 0.6918, with the greenback underpinned by safe-haven demand as the deteriorating situation in Iran spurred oil and weighed on broader risk sentiment to start the week. On Wall St. the Nasdaq closed -1.6%, the S&P 500 -.8%, and the Dow Jones -.3%. U.S. 10-year yields rose 6bps to 4.622%, while Brent Crude rose 9.2% to $83 a barrel. Major event risk arrives tonight with U.S. Core CPI followed by the Fed Chair testimony, while Retail Sales data follows on Thursday night. Headline CPI is expected to decline by -0.1% MoM, while core inflation is forecast to accelerate to +0.3% MoM. As the final inflation report before the FOMC’s July 29 meeting, the release will likely play an important role in shaping expectations for the Committee’s next policy decision.

EUR

AUDEUR opened marginally lower at 0.6077, with little net movement as focus stays on the Middle East. European equities closed in the green before the oil spike hit, with the CAC up +0.3% and DAX up +0.2%. There is no major Eurozone data this week, so the Euro’s direction will be driven by global headlines and shifting Fed and ECB rate expectations.

GBP

AUDGBP opens flat at 0.5181 this morning. The FTSE also showed no movement into the close, showing relative resilience as markets scaled back global rate-cut expectations. Political instability persists in the UK with Andy Burnham expected to become Labour leader next week. Tonight, BoE Governor Bailey is due to testify on the Financial Stability Report before the Treasury Select Committee ahead of Thursday’s UK GDP print. The Pound’s broader direction remains tied to rate differentials and global politics.

NZD

AUDNZD continues its decline to open at 1.2018. Earlier this morning some minor data released for New Zealand. The NZIER Business Confidence came in at +8 from a previous -4 showing a slight uptick in economic optimism. However, Visitor Arrivals m/m saw a decline from last month to print at -2.4% from a previous +1.8%