Forex Today: Fading hopes of a US-Iran deal weighs on market mood

Here is what you need to know on Tuesday, August 11:

Crude Oil prices surged higher on Monday and revived inflation fears as the latest headlines surrounding the conflict in the Middle East failed to offer any optimism. The US economic calendar will feature mid-tier data releases on Tuesday, such as the NFIB Business Optimism Index and Existing Home Sales for July.

After posting large losses in the previous week, the US Dollar (USD) Index recovered modestly on Monday. Early Tuesday, the USD Index stays slightly below 100.00.

Iran said on Monday that even if they reach a deal with Oman to manage the Strait of Hormuz, this by itself will not be enough to fully open the waterway until the US agrees to a list of conditions. In response to one of Tehran's demand for Washington to pay for damages, US President Donald Trump said that they will also seek compensation from Iran for casualties.

The barrel of West Texas Intermediate (WTI) rose nearly 7% on Monday and erased a large portion of last week's losses. At the time of press, the WTI was trading near $82.50, rising about 1.3% on the day.

Oil rally extends as Strait of Hormuz disruption bites into Iran exports

Analysts at Commerzbank note that the latest leg higher in crude has been driven by persistent tensions around the Strait of Hormuz, with "Brent crude oil prices rose 5.0% to USD87.72, as the Strait of Hormuz standoff showed no sign of resolution." They add that the supply impact is increasingly visible on the ground, pointing to fresh monitoring data: "Satellite imagery shows Iran's main oil export terminal at Kharg Island has been largely idle this month, underscoring the physical toll of the closure."

The Reserve Bank of Australia (RBA) announced that it left the Official Cash Rate (OCR) unchanged at 4.35% following the August policy meeting. In the policy statement, the RBA noted that inflation is still too high and they will remain focused on ensuring that high inflation does not become embedded in the economy. RBA Governor Michele Bullock noted in the post-meeting press conference that they will raise rates if needed. AUD/USD's reaction to the RBA event was largely muted and the pair was last seen trading virtually unchanged on the day near 0.7050.

RBA stance keeps Aussie under pressure as Commerzbank flags dovish tilt

Analysts at Commerzbank highlight that the latest RBA communication “does not read particularly hawkish,” noting that “the new forecasts revised the expected unemployment rate upward, while short-term inflation forecasts were revised downward.” According to the bank, “all in all, it must be said that the decision and the forecasts seem to be in line with market expectations; the AUD is showing little movement in its initial reaction, at least.” In their medium-term outlook, Commerzbank reiterates that they “continue to expect that the RBA’s next move will be an interest rate cut, so the AUD is likely to remain under pressure in the coming months.”

EUR/USD stays on the backfoot and trades marginally lower on the day below 1.1550 after closing in negative territory on Monday.

GBP/USD pulls away from the highest level it touched in nearly two months at 1.3530 on Monday and moves sideways at around 1.3500 in the European morning.

Gold (XAU/USD) extended its rally during the early trading hours of the Asian session and reached its strongest level since early June above $4,400 before reversing its direction. At the time of press, Gold was trading below $4,370, losing about 0.5% on the day.

USD/JPY holds steady above 159.00 early Tuesday following Monday's rally that saw the pair gain nearly 1% on the day.

Japan rate path and capital flows seen as key to JPY recovery

Analysts at OCBC reiterate that they "maintain our end-2026 USDJPY forecast of 163," but note that their stance on the Yen could shift if domestic policy dynamics evolve more favourably. They indicate they "could turn more constructive on the JPY if the Bank of Japan follows through with a more aggressive rate hike path and if policies that encourage GPIF and NISA-related flows back into Japanese assets materialise."

OCBC adds that "a September rate hike, combined with evidence of domestic investors reallocating capital back into Japanese assets, could drive a more sustained JPY recovery and provide longer-lasting relief for long-end JGB yields," underscoring the importance of both monetary tightening and renewed local demand for Japan’s bond and equity markets in anchoring the currency.