The Australian Dollar (AUD) began Thursday's session with modest gains of 0.04%, following a previous day's loss of 0.68% against the US Dollar (USD), as broad USD strength prevailed despite improved risk appetite. At the time of writing, AUD/USD trades at 0.6950, reflecting a stabilization after recent volatility [1]. Geopolitical developments, particularly speculation about US-Iran talks to end the war in the Middle East, have been driving market sentiment. These headlines have pushed US equities, the US Dollar, and Gold prices higher, while US Treasury bond yields have fallen [1].
Australian inflation data released on Wednesday showed the Consumer Price Index (CPI) slowed from 3.8% to 3.7% year-on-year in February, offering some relief to households. However, inflation remains above the Reserve Bank of Australia's (RBA) 3% target. The trimmed mean CPI was unchanged at 3.3% YoY, following a downward revision from 3.4% to 3.3% in January. It is noted that this data was collected before the recent Middle East conflict, which has since driven global energy prices higher and increased inflationary risks worldwide [1].
RBA Assistant Governor Christopher Kent commented that the Iran war has tightened financial conditions and poses a supply shock risk to inflation. He emphasized that while central banks cannot change the initial rise in prices, they can prevent longer-term inflationary expectations from escalating. Last week, the RBA raised interest rates to 4.1% on a narrow vote split, attributed by Governor Bullock to timing rather than policy stance [1].
In the US, Fed Governor Stephen Miran maintained a dovish tone, stating that the Fed's inflation mandate "has not been so problematic," and noting a weakening job market. Miran suggested that the Fed should cut rates towards neutral this year [1]. On the technical front, AUD/USD trades at 0.6942 with a mildly bearish near-term bias. The pair has slipped below key support levels and moving averages, indicating fading upside momentum and building downside pressure. Initial resistance is seen near 0.7000, with further resistance at recent swing highs [1].
CONCLUSION
AUD/USD remains steady near 0.6950, with geopolitical tensions and softer Australian inflation shaping market sentiment. The RBA's cautious stance and ongoing global risks suggest limited upside for the Aussie, while technical indicators point to building downside pressure. Market participants are closely watching developments in the Middle East and central bank policy signals for further direction.