Australian Dollar Holds Steady Near 0.7150 Amid Rising Fed Hike Bets, Middle East Tensions

• AUD/USD flatlines around 0.7150 in Monday’s early Asian session. 
• Fed rate hike bets grow, which could support the US Dollar. 
• Trump warned Iran to ‘get moving’ or ‘there won’t be anything left.’

The AUD/USD pair trades on a flat note near 0.7150 during the early Asian session on Monday. The pair steadies after retreating from multi-year highs amid shifting US interest rate expectations and ongoing geopolitical tensions. Traders will take more cues from the Chinese Industrial Production and Retail Sales reports, which are due later on Monday. 

Market bets for the path of monetary policy from the US Federal Reserve (Fed) continue to shift towards possible rate hikes. Several Fed officials this week stated that keeping inflation pressures in check was a top priority, while others did not rule out the possibility that rate hikes may be needed if price pressures keep rising.

Markets are now pricing in nearly a 48.4% probability the US central bank could hike rates by at least 25 basis points (bps) at its December meeting, compared with 14.3% a week ago, according to the CME FedWatch tool. 

The United States (US) and Iran remained far apart Sunday on a deal to end weeks of war and reopen the crucial Strait of Hormuz, highlighting the risks of a fragile ceasefire. On Sunday, US President Donald Trump threatened Iran to “get moving" or seemingly face new consequences. Signs of a prolonged conflict in the Middle East could lift a safe-haven currency such as the US Dollar (USD) and act as a headwind for the pair in the near term.