The Australian Dollar (AUD) advanced against the US Dollar (USD) on Monday, with AUD/USD trading around 0.7070, up 0.33% on the day after rebounding from a nearly two-month low near 0.7024 [1]. This recovery comes as investors digest robust US labor market data and shifting monetary policy expectations in both Australia and the United States [1].
The Reserve Bank of Australia's (RBA) continued hawkish stance has provided support for the AUD. RBA Governor Michele Bullock reiterated last week that the central bank remains focused on bringing inflation under control, emphasizing that price pressures are still too high. She stated that the Board is prepared to take whatever action is necessary to achieve price stability and full employment [1]. This commitment has helped limit losses in the AUD, even as the USD gained favor following the release of the May US Nonfarm Payrolls (NFP) report, which showed the US economy added 172,000 jobs—well above market expectations of 85,000. The previous month's NFP reading was also revised higher [1].
The strong US jobs data reinforced expectations of a more restrictive monetary policy from the Federal Reserve (Fed). According to the CME FedWatch tool, traders now see a 38% chance of a 25-basis-point rate hike at the September meeting, up from 22% a week ago [1]. Despite this, the US Dollar Index (DXY) declined toward 99.90 after reaching a two-month high near 100.20, providing some relief for AUD/USD [1].
Geopolitical developments also played a role, as Iran's armed forces announced the end of military operations against Israel, while warning of a stronger response to any future Israeli attacks. US President Donald Trump stated that ceasefire discussions were progressing, which eased geopolitical tensions, reduced safe-haven demand, and contributed to the pullback in the USD, supporting risk-sensitive currencies like the AUD [1].
On the day, the Australian Dollar was the strongest performer against the US Dollar among major currencies, gaining 0.31% [1].
CONCLUSION
The Australian Dollar's rebound was driven by the RBA's hawkish stance and easing geopolitical tensions, which offset the impact of strong US jobs data and rising Fed rate hike expectations. Market sentiment remains cautiously positive for the AUD, with traders closely watching upcoming US and China data for further direction.