AUD/USD under pressure as Australia business confidence crashes to -29

AUD/USD faces significant downside pressure after Australian business confidence plunged to -29, marking its lowest reading since the COVID-19 pandemic. The sharp deterioration in sentiment has been driven by geopolitical shock stemming from the Iran war escalation, which has severely impacted the economic outlook. Adding to the bearish narrative, Q2 headline inflation remains elevated at approximately 5%, largely attributed to surging fuel costs linked to the conflict. The Reserve Bank of Australia has signaled uncertainty about whether current interest rate settings are appropriate to contain inflation, emphasizing the need to bring inflation back within the 2-3% target band. This hawkish ambiguity creates a complex backdrop for the Australian dollar, as persistent inflation argues against rate cuts while collapsing business confidence suggests economic weakness ahead. Traders should monitor AUD/USD for continued selling pressure, particularly if geopolitical tensions escalate further. The combination of deteriorating domestic confidence, elevated energy-driven inflation, and global risk aversion creates a notably bearish environment for the Aussie dollar against its major counterparts.