Australian Dollar Rallies on Iran-Israel Peace Hopes; Market Eyes Jobs Data

Highlights:

• The Australian dollar rises to US65.20¢ amid reports that Iran is seeking to ease tensions with Israel, boosting global risk sentiment.
• Bond yields climb, with the 10-year yield hitting 4.25% as investors shift away from safe-haven assets.
• Markets await May jobs data, with strong employment figures potentially impacting expectations of a July rate cut by the Reserve Bank of Australia.

Aussie Dollar Surges on Geopolitical Relief

The Australian dollar rebounded sharply to US65.20¢ in early trading on Tuesday, up from US64.65¢, as market sentiment lifted on reports that Iran was actively pursuing an end to hostilities with Israel. This de-escalation in geopolitical tensions bolstered risk appetite, prompting a broader retreat from the US dollar. At the time of writing, the Australian dollar has risen approximately 5.4% year-to-date, reflecting growing optimism in global markets.

Bond Yields Climb on Reduced Safe-Haven Demand

Australian bond markets responded with a notable shift, as investors moved out of safer assets. The three-year government bond yield rose to 3.36%, while the 10-year yield gained 6 basis points, reaching 4.25%. These movements signal investor confidence in a stabilising global backdrop and diminishing demand for defensive positions.

Jobs Data in Focus Ahead of RBA Meeting

Attention now turns to Australia’s upcoming employment report, due Thursday. Economists forecast an addition of 25,000 jobs for May, with the unemployment rate expected to hold steady at 4.1%. A strong labour market result could influence the Reserve Bank of Australia's (RBA) monetary policy stance.

Currently, traders are pricing in about a 75% probability of a rate cut at the RBA’s next meeting on July 8, potentially lowering the cash rate to 3.6%. However, robust job figures could challenge those expectations and spark further currency and bond market volatility. As investors weigh geopolitical developments and local economic indicators, the Australian dollar’s trajectory remains closely linked to both global sentiment and domestic data.

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