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The Australian dollar performed relatively well this week, driven largely by weaker than expected US inflation data which saw it rally in the early part of the week.

The latest flare up in tensions between the US and Iran failed to trigger any significant safe haven flows in currency markets, or in any financial markets for that matter.

The half time whistle has sounded on 2026, drawing to a close an eventful first six months of the year that will predominantly be remembered for the elevated geopolitical risk premium associated with the Iran war.

The dollar rally that has lasted since early May seems to be petering out.

A pull back in risk sentiment saw stocks markets drop globally last week, led by the big winners of the last few years, technology companies.

The Fed, now under the stewardship of the new chair Kevin Warsh, seems considerably more concerned about inflation than markets expected, if his first press conference at the helm is anything to go by.

Markets have been cheering the US-Iran framework deal to end their conflict, which sent oil prices to the lowest levels since the early days of the conflict.

Stock markets reacted to the strong US payroll report with a sell-off that accelerated into Friday's close.

Investors will be forgiven for having half an eye on the sports pages this month as the 2026 FIFA World Cup kicks off, bringing the usual mix of drama and excitement. That said, financial markets are set to serve up a spectacle of their own.

The May local elections have accelerated an already precarious political situation for Keir Starmer’s government, and once again brought domestic political risk firmly back onto the radar for currency markets.