The Australian and New Zealand dollars are experiencing a tumultuous week, with the ongoing US-Iran conflict and its impact on oil prices sending ripples through the region's financial markets. The Aussie dollar, in particular, is facing a delicate balance as it navigates the aftermath of last week's gains and the recent resistance level at US$0.7021. This week, the currency hit a four-day low of US$0.6960, only to recover and close 0.1 per cent higher at US$0.6988. The kiwi dollar, on the other hand, is bracing for a crucial inflation report that could significantly influence the Reserve Bank of New Zealand's (RBNZ) near-term monetary policy decisions. The kiwi slipped to an intraday low of US$0.5827 but managed to stabilize at US$0.5844, indicating a 1.4 per cent rally from the previous week's performance. The US military's relentless attacks on Iran, now in their ninth day, have triggered a surge in oil prices, with Brent crude climbing 3 per cent to surpass US$90 a barrel for the first time in over a month. This development is complicating the policy decisions of central banks in the Antipodean region, with the RBNZ signaling further rate hikes despite the recent increase to 2.5 per cent. The upcoming inflation data in New Zealand is the focal point, with expectations of a jump to 4 per cent in the second quarter, driven by soaring fuel prices. The attention will be on non-tradeable inflation, which will determine whether the higher fuel costs are permeating into broader domestic prices. A lower inflation print, especially in the non-tradable sector, could provide the RBNZ with breathing room, potentially leading to just one more rate hike this year instead of two. Conversely, a higher inflation figure will empower the RBNZ to hike rates more aggressively, with markets pricing in a 78 per cent chance of a follow-up rate hike in September, pushing rates towards 3.5 per cent by mid-next year. The Reserve Bank of Australia (RBA) is also under scrutiny, with the latest oil price spike increasing the likelihood of another rate hike this year, priced at 76 per cent by December. The Australian dollar's rebound of 0.2 per cent to NZ$1.1958 on Monday is a testament to this, as it recovers from a nearly 4-month low. However, the jobs data due on Thursday will be pivotal, with forecasts predicting a 15,000 job rise in June and a steady unemployment rate at 4.4 per cent. Any unexpected weakness in this data could prompt markets to reassess the risk of further rate hikes, potentially impacting the Australian dollar's trajectory. The US-Iran conflict, oil price volatility, and the impending inflation reports are creating a complex environment for the Antipodean currencies, with central banks navigating the fine line between economic stability and inflation control.
