Australian Dollar advances above 0.7050 as US and Iran announce a peace deal

The AUD/USD pair gathers strength to around 0.7075 during the early Asian session on Monday. The reports that the United States (US) and Iran announced a peace deal to bring their nearly four-month war to an end underpin the riskier asset, such as the Australian Dollar (AUD) against the US Dollar (USD). The Reserve Bank of Australia (RBA) interest rate decision will take center stage later on Tuesday. 

Bloomberg reported on Sunday that Washington and Tehran have reached a deal to reopen the Strait of Hormuz, with both sides declaring the immediate and permanent termination of military operations on all fronts, including in Lebanon. 

Iran's National Security Council confirmed a ceasefire agreement with the US, adding that final deal talks to start after the other party fulfills commitments under the memorandum of understanding. Iranian officials said the maritime blockade against Iran would end immediately and entirely. Iran's Mehr News Agency stated that the US naval blockade will lift completely within 30 days and the Strait of Hormuz will reopen within 30 days under Iranian arrangements. 

The Reserve Bank of Australia (RBA) will announce its next interest rate decision on Tuesday. The Australian central bank is likely to keep its key interest rate unchanged for the first time this year, with money markets paring bets on further tightening. 

Traders will closely monitor whether RBA Governor Michele Bullock signals some comfort at the current rate or keeps the door open to further moves to counter stubborn price pressures. Fading expectations of additional interest rate hikes by the RBA might cap the upside for the Aussie in the near term.