AUD/USD under pressure as RBA hikes 25bp amid Middle East tensions

The Asia-Pacific session saw multiple significant developments impacting key currency pairs. The Reserve Bank of Australia raised its cash rate by 25 basis points as widely expected, though Australian consumer confidence has plunged to pandemic-era lows as inflation expectations surge, creating a challenging backdrop for AUD/USD. BOJ Governor Ueda signaled inflation is rising toward the 2% target ahead of the policy meeting, reinforcing hawkish expectations for USD/JPY, while Japanese officials expressed vigilance on yen weakness, yields, and fiscal policy. Geopolitical risks escalated as a tanker was struck near the Strait of Hormuz, prompting UK maritime warnings and pushing oil prices higher. This Middle East instability has further reduced Fed rate-cut odds to just 47% for this year, supporting the US dollar broadly. The PBOC continued managing USD/CNY through its daily fixing. Traders should monitor the interplay between rising geopolitical risk premiums, divergent central bank trajectories, and deteriorating risk sentiment. The combination of hawkish RBA policy amid collapsing consumer confidence and escalating Middle East tensions creates elevated volatility conditions across Asia-Pacific pairs.