The Australian dollar rose to around $0.695 but was on track to finish the week largely unchanged as investors monitored developments surrounding the Strait of Hormuz following renewed tensions in the Middle East. The safe-haven US dollar strengthened, while oil prices climbed after the US and Iran carried out military strikes in the Gulf earlier this week. However, both countries are now set to resume peace talks despite the recent escalation. Meanwhile, the International Monetary Fund lowered its 2026 growth forecast for Australia to 1.9% from 2.0% and warned inflation would remain elevated at around 4% this year. The Reserve Bank of Australia will meet in August and is expected to keep its cash rate unchanged at 4.35%, though markets still price in a roughly 60% chance of one final rate hike later this year, depending on the movement of oil prices. Traders also await key employment and inflation data due later this month, which could offer fresh clues on the policy outlook.
