• The Australian Dollar gains as markets welcome a framework agreement between Washington and Tehran.
• The US Dollar weakens, supporting AUD/USD, while Oil prices fall sharply.
• Investors now turn their attention to the Reserve Bank of Australia's monetary policy decision on Tuesday.

AUD/USD trades around 0.7070 at the time of writing on Monday, up 0.35% on the day, benefiting from renewed risk appetite after the United States (US) and Iran announced a framework agreement aimed at ending their conflict.

Markets reacted positively to statements from both sides. US President Donald Trump said that the Strait of Hormuz would be reopened as part of the agreement, while Iranian officials confirmed the existence of a negotiation framework that is expected to be finalized in the coming days. According to several media reports, the ceasefire in place since April will be extended to allow further talks between the parties.

The development has reduced demand for safe-haven assets and weighed on the US Dollar. The US Dollar Index (DXY) falls around 0.3% to trade near 99.50 at the time of press, while US equity index futures rise between 1% and 2% during the European session. At the same time, Oil prices decline sharply, with the West Texas Intermediate (WTI) barrel losing around 5% as investors anticipate lower risks to global energy supplies.

The weaker Greenback supports risk-sensitive currencies such as the Australian Dollar (AUD). Markets have also scaled back expectations for further tightening by the Federal Reserve (Fed), as concerns about an inflationary shock linked to the Middle East conflict ease following the agreement announcement.

Investors are now focusing on the Reserve Bank of Australia (RBA) monetary policy decision scheduled for Tuesday. The Australian central bank is widely expected to leave its cash rate unchanged at 4.35%, with traders having significantly reduced expectations of another rate increase in the near term.

Market participants will also closely watch comments from Governor Michele Bullock regarding the inflation outlook and the future direction of monetary policy. Australia's May Consumer Price Index (CPI) data, due on June 24, could provide the next major catalyst for interest rate expectations.