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The USD has started the North American trading session for July 28 with modest gains against the EUR, JPY, and GBP. The gains are relatively small, with changes of 0.11% or less. The RBA Governor, Michele Bullock, maintained a cautiously hawkish tone overnight, emphasizing that inflation remains too high and that the central bank is prepared to raise interest rates again if needed. However, she also stressed that it is too early to determine whether the tightening already delivered will be sufficient to bring inflation back to target.
The USD's gains come as the Australian dollar showed little reaction to Bullock's comments, with markets appearing unconvinced that another rate hike is imminent. The focus remains on the Middle East, where geopolitical tensions have eased somewhat as the U.S.-Iran pause in hostilities enters its third day. Crude oil prices continue to drift lower as traders scale back fears of an immediate supply disruption through the Strait of Hormuz.
The implications of these developments are significant for markets and traders. The USD's gains could be short-lived if the focus shifts back to the U.S. economy and the potential for interest rate cuts. The Australian dollar's lack of reaction to Bullock's comments suggests that markets are waiting for more concrete evidence of a rate hike before making any significant moves. The situation in the Middle East remains fluid, and any escalation in tensions could lead to a surge in oil prices and a subsequent impact on the global economy.
