AUD/USD dips as Trump delays Iran decision, US Dollar strengthens on policy divergence

• AUD/USD slips below 0.6480 as July RBA rate cut bets drag the Australian Dollar lower
• The US Dollar holds firm as Trump delays Iran bombing decision, but ongoing Middle East tensions sustain safe-haven demand.
• AUD/USD traders await Fed Daly's speech and June PMI data, key weekend events that could guide the direction of next week.

The Australian Dollar (AUD) remains under pressure against the US Dollar (USD) on Friday, with AUD/USD trading near 0.6480 at the time of writing. 

Global risk sentiment continues to deteriorate, supporting safe-haven demand for the US Dollar, while domestic weakness and dovish expectations from the Reserve Bank of Australia (RBA) further weigh on the Australian Dollar.

Geopolitical uncertainty remains a dominant theme after US President Trump delayed a decision on direct US involvement in the Israel-Iran conflict. 

While the announcement of a two-week window eased immediate fears, lingering volatility in the region has kept markets on edge and sustained demand for the US Dollar. 

Meanwhile, the Federal Reserve's (Fed) cautious tone following its June policy meeting reaffirmed expectations for a gradual, data-dependent path of rate cuts.

Combined with elevated oil prices driven by Middle East tensions, this hawkish backdrop has reinforced inflation concerns and bolstered the case for higher rates to remain elevated for the long term.

On the domestic front, Australian Treasurer Jim Chalmers, speaking on Tuesday, flagged persistent structural challenges in productivity, resilience and fiscal sustainability. He called for long-term reforms, including tax policy, to strengthen the country's economic foundation. His remarks come as markets increasingly price in a potential RBA rate cut in July, particularly amid recent soft data.

The case for easing was reinforced by Australia's May employment report, released on Thursday, which showed a surprise 2.5K drop in total jobs, missing forecasts for a 25K gain. While full-time employment rose by 38.7K, it was offset by a 41.1K fall in part-time jobs. 

The unemployment rate remained steady at 4.1%, but the weak headline print dragged AUD/USD to a two-week low, reinforcing the dovish shift in RBA expectations.

Looking ahead, traders will monitor two key events over the weekend that could influence the direction of AUD/USD. 

On Sunday, San Francisco Fed President Mary Daly is scheduled to speak at the Western Economic Association International's 100th Annual Conference. Her comments on inflation or the policy outlook could influence expectations for a September Fed rate cut and impact US Dollar sentiment.

Later that evening, markets will shift focus to Australia's June S&P Global Purchasing Managers' Index (PMI) release, covering the Composite, Manufacturing, and Services sectors. As early indicators of economic momentum, the reports, especially the Services PMI, will be closely watched for signs of domestic strength or weakness. Softer readings may reinforce calls for an RBA cut, while stronger data could offer temporary support to the Australian Dollar.