AUD Rises but Stalls Near 0.6950 on Iran Tensions

Key Moments

Geopolitical Risks Contain AUD/USD Upside

The Australian Dollar is extending its advance against the US Dollar for a second consecutive day on Tuesday, yet buying momentum is failing to secure a sustained move above the 0.6950 level. Despite trading in positive territory, AUD/USD is largely confined, with the pair holding above 0.6930 but encountering resistance as market participants remain wary in the face of rising geopolitical risk tied to Iran.

Traders are showing limited appetite to reduce exposure to the US Dollar while the deadline on Iran approaches a critical juncture. The cautious stance is capping further gains in the pair even as Australian data point to a sharp upturn in price pressures.

US Ultimatum on Iran Sets the Risk Tone

Market sentiment is being heavily influenced by developments around the US ultimatum on Iran. US President Donald Trump stepped up his rhetoric toward the Islamic Republic, stating that the US military has the capacity to take a country in a single night and adding that “that night might be tonight.” The latest deadline to reopen the Strait of Hormuz is set for Tuesday, 8:00 PM ET (00.00 GMT on Wednesday).

On Monday, both Iran and the US rejected a 45-day ceasefire proposal put forward by Pakistan. In response, Tehran presented a 10-point roadmap aimed at achieving a lasting peace agreement. Trump called those proposals “significant,” while stressing that they are not sufficient.

Australian Inflation Data Surprises to the Upside

Earlier in the session, Australia’s TD-MI Inflation Gauge delivered a notably strong result, marking the sharpest monthly increase on record. The index rose 1.3% in March after a 0.2% decline in February. On an annual basis, the gauge climbed to 4.3%, up from 3.6% in February, reaching its highest level in more than two years.

These outcomes underscore mounting inflationary pressures, which are being driven in part by higher energy costs associated with the war in Iran. The data intensify expectations that the Reserve Bank of Australia may need to maintain or extend its policy tightening efforts to contain rising prices.

US Data in Focus but Impact Seen Limited

In the United States, February Durable Goods orders are scheduled for release later on Tuesday. However, since the data precede the onset of the war on Iran, they are anticipated to have only a modest effect on the US Dollar in the current environment.

The main event on the US calendar this week will be the release of the Federal Open Market Committee (FOMC) minutes on Wednesday. Market participants will scrutinize the document to gauge the likely timing of the Federal Reserve’s next interest rate increase.

TD-MI Inflation Gauge Details

The TD-MI inflation gauge, published by the Melbourne Institute, is constructed to offer a timely and precise monthly snapshot of inflation in Australia. It is based on the Australian Bureau of Statistics framework for the quarterly consumer price index and estimates month-to-month price shifts across a broad range of goods and services in the major capital cities.

For the month-on-month (MoM) reading, the indicator compares prices in the reference month with those of the preceding month. A stronger figure generally boosts the probability of an interest rate hike by the Reserve Bank of Australia and is typically interpreted as supportive for the AUD. Conversely, a weaker reading is often seen as negative for the currency.

The year-on-year (YoY) measure compares prices in the reference month with those from the same month a year earlier, providing a broader perspective on underlying inflation trends. Similar to the MoM figure, elevated YoY inflation is usually regarded as bullish for the Australian Dollar, while a subdued rate is viewed as bearish.

TD-MI Inflation Gauge Snapshot

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