US dollar edges to the lows as Australian dollar leads a comeback

The Australian dollar is the top performer today and is making fresh session highs, up 27 pips. It’s part of a broader move that includes USD selling, excluding against the yen. It’s a broad, risk-positive move as the market calculates that any Israeli response to Iran won’t lead to further escalation.

Israeli officials cited by Reuters said Netanyahu’s five-member war cabinet favored
retaliation in a meeting on Sunday, although the panel was divided over
the timing and scale of any such response. Two officials signalled retaliation was not imminent and that they would not act alone.

The US has drawn a clear line here and said it won’t participate in further attacks against Iran.

It remains an extremely dangerous moment and Israel or Iran could miscalculate from here. Still, the message from markets right now is clear: The likely outcome is that open war doesn’t break out.

That could see the Friday moves in risk assets slowly fade, including in AUD/USD but it certainly won’t unwind as quickly as it happened on Friday.

This article was written by Adam Button at www.forexlive.com.