The Australian Dollar (AUD) edged lower against the US Dollar (USD) during early Asian trading on Monday, with the AUD/USD pair slipping to 0.6485. Renewed geopolitical tensions in the Middle East have spurred safe-haven demand for the greenback, weighing on the Aussie ahead of key Chinese economic data releases.
The escalation follows a series of Israeli airstrikes on Iranian nuclear and missile sites that began Friday, reportedly killing senior military figures. In retaliation, Iran launched a fresh offensive on Sunday night, with explosions reported in the Israeli port city of Haifa. Iranian state-linked outlet Mehr News confirmed the initiation of the “fourth phase” of Iran’s military response, with officials vowing to “respond firmly to any adventurism” from Israel.
Despite the geopolitical flare-up, markets largely brushed aside Friday’s positive US economic data. The University of Michigan Consumer Sentiment Index rose sharply to 60.5 in June from 52.2 in May, marking the first improvement in half a year and surpassing expectations. However, global risk sentiment remains fragile, favoring the USD as investors seek safety.
Looking ahead, all eyes turn to China’s May Retail Sales and Industrial Production figures, set for release later Monday. Given Australia’s deep trade ties with China, stronger-than-expected data could provide much-needed support for the China-sensitive Australian Dollar. A solid showing from China may help counterbalance the risk-off tone and potentially limit further losses for AUD/USD.
Until then, the pair is likely to remain sensitive to developments in both global geopolitics and economic signals from China, with traders cautious about taking strong directional positions.
