AUD Surges as Hopes of US-Iran Peace Deal Lift Risk Appetite
The Australian dollar led major FX gains on Monday as hopes of a US-Iran peace deal boosted risk appetite. The RBA and BOJ are set to announce policy decisions, which will be crucial for AUD/USD, AUD/JPY, and EUR/AUD.
Traders expect the RBA to leave rates unchanged, but this could still lead to a hawkish hold, paving the way for another leg higher in Australian dollar pairs. The BOJ is expected to deliver a 25bp hike, taking its policy rate to a 31-year high of 1%, but it's unclear whether this will be accompanied by sufficiently hawkish guidance to justify short covering on the Japanese yen.
AUD/USD extended its retracement higher on Monday, reaching just shy of the 71c handle. However, a hawkish hold from the RBA could help AUD/USD reach for 71c today. On the other hand, there's still potential for AUD/USD to dip towards 0.6900 when the current upswing is complete.
AUD/JPY rebounded from its low of 112 and is expected to extend its gains in the near term if the RBA delivers a hawkish hold. The 114.00 handle is the next obvious target for bulls if prices break above 113.50.