The AUD/USD currency pair was the largest loser, plummeting under the key 0.6500 figure. This decline came at a time when geopolitical risks were exacerbating tensions in the Middle East. In fact, during the early Asian session on Monday the exchange rate fell all the way to 0.6485. This drop off reflects an acute concern from investors regarding the persistent political uncertainty in the region.
The causes behind the recent spike in tensions, especially after an Israeli strike on Iran, have played a role in raising a more valuable US Dollar. The trader’s response to these events has caused the wave of news flow to create a generally more risk-averse tone to forex markets. Further, some investors have begun the process of taking their investments and moving to the safety of US Dollar. This currency has historically been viewed as a safe haven in times of turmoil.
It’s easy to point to several factors that have caused the fall of the Australian Dollar. Investors are straining to hear over the sound of geopolitical risks. Simultaneously, they’re preparing for the early next week release of a new wave of important Chinese economic indicators, most notably May Retail Sales and Industrial Production figures. These figures will give us an even clearer picture of China’s economic health. This new data is crucial for Australia, which has become ever-more reliant on China’s demand for commodities.
As traders look ahead to the big economic data drops later this morning, they seem a little cautious, and rightfully so, and on guard. These reports certainly have the potential to move the market sentiment significantly. In fact, they could do enough to send the AUD/USD pair in the opposite direction of recent trend. Still, analysts are cautioning that if China does grow better than expected, the knock-on effect would make the Aussie Dollar even stronger. On the contrary, bad numbers would accelerate its fall.