Aussie pushes above 70 US cents ahead of June labour force data

The Aussie has pushed above 70 US cents for the first time in almost amonth, as FX markets continue to look through the escalation in theMiddle East. The move reflects broader USD softness rather than a shiftin the local narrative, with the currency largely unbothered by ongoingdevelopments in Iran.It has been a quiet start to the week on the data front, though attentionnow turns to Thursday's labour force release for June. We expect amodest 16.5k gain in employment, with the unemployment rate holdingsteady, broadly in line with the market's 15.2k estimate and 4.4%unemployment forecast. In our view, we think data in recent months has shown the underlyingtrend in the labour market has continued to soften. Employment growthon a 3m/3m basis eased to 0.2% in May, and with the full impact of theRBA's earlier rate hikes yet to be fully felt alongside slowing economicgrowth, hiring intentions and labour demand are likely to ease further.Labour force growth is also moderating, but is expected to remain aheadof labour demand, which will place upward pressure on theunemployment rate. Indeed, we expect the unemployment to peak at4.6% by late 2026.On the Middle East, oil prices have pushed higher this week as the risk offurther supply disruption grows. US strikes on Iran have continued, withTrump warning of retaliation after the deaths of three US soldiers, whileIran has kept up attacks on shipping in the Strait of Hormuz and targetedUS military sites across the region. Prices jumped further on reports thatYemen's Houthi militants would impose a ban on maritime traffic fromSaudi Arabia, threatening one of the few remaining routes able to offsetsome of the collapse in Hormuz traffic. Oil price gains were cappedsomewhat by reports of a proposed 10 day ceasefire aimed at revivingthe largely collapsed US-Iran peace deal. Tanker traffic through theregion has fallen sharply again, and the US blockade of Iranian portscontinues to constrain trade.This disruption has spilled over into gas markets too, with European LNGfutures hitting four month highs on concerns over winter supply. Storagelevels are currently around half full, a touch below the typical level forthis time of year, leaving limited buffer should the conflict persist or acolder than expected winter lift demand. Either scenario points to furtherupside risk for gas prices ahead. Given Australia's position as a majorglobal gas exporter, sustained strength in LNG prices could provide atailwind for the external sector and terms of trade, offering a furthersource of support for the Aussie over coming months.