Aussie finds support from stronger household spending data

The Aussie started the week where it left off, supported by reports of apotential peace deal between US and Iran. That said, the currency wenton to lose some steam, before finding support from stronger thanexpected household spending data.Domestically, the key data was ABS household spending data for June.Nominal spending rose 0.8% MoM, well above the 0.2% expected andfollowing May's 1.2% rise. More importantly, spending volumes for Q2rose 0.7% QoQ, following 0.8% in Q1. While the data was a strongeroutcome than we had expected, it does not rule out a slowdown inconsumer demand still emerging, though today's data suggests it may beless pronounced than feared. Despite the upward surprise, we maintainour view that the RBA will keep the cash rate unchanged at next week'smeeting and through the remainder of this year and into 2027.Elsewhere, the main development came earlier this week where both USand Japan authorities confirmed they had jointly intervened in FXmarkets to support the yen. This was the first coordinated interventionsince early 2011, and the first joint US-Japan buying intervention sinceMid-1998 during the Asian financial crisis. Reports suggests that the intervention may have totalled close toUS$80bn, much largers than Japan’s attempts earlier this year, withTokyo doing the bulk of the buying while the Fed appeared to supportvia euro sales. The scale of direct US involvement remains unclear,though the signalling effect is likely more important than the size of anyactual US flows. The move follows growing concern in Washington that aweaker yen has been pushing Japanese bond yields higher, with worriesthis could eventually spill over into US Treasuries. That said, interventionhas historically bought time rather than reversed the trend, with successhinging on softer US data keeping the Fed on hold and on the BOJbacking it up with a September rate hike, which markets fully expect.On the Middle East, Brent crude prices fell sharply at this week's openafter Trump said Iran peace talks had resumed, having cancelled aplanned strike at Saudi Arabia's urging. Iran denied any talks were takingplace, saying it was only discussing safe passage through the Strait ofHormuz with Oman. OPEC+ approved another modest quota increase,completing the unwind of 2023 output cuts and leaving room for moresupply once the conflict ends.That said, the physical disruption in the region remains largely intact. TheUS blockade of Iranian ports continues to redirect shipping, Saudiexports have fallen, and a tanker near Oman reported an explosion inrecent days, underscoring that threats to vessels persist even assentiment has improved. Disruption has also broadened beyond the Gulf,with Ukrainian drone strikes repeatedly shutting down a key RussianBlack Sea terminal. Despite this accumulation of supply risks, prices havenot spiked as sharply as earlier in the conflict, reflecting the large bufferof stock releases and demand destruction already absorbed by themarket. That buffer is now considerably smaller, leaving pricesvulnerable to a sharper repricing should disruptions worsen further.