AUD/USD hits multi-year highs near 0.7270 as hopes of a US-Iran deal grow

AUD/USD hits session highs near 0.7270 for the first time since June 2022.
Hopes of a US-Iran peace deal have boosted risk appetite, crushing demand for the US Dollar.
Australian AIG Industry Index improved in March, providing additional support to the AUD.

Guillermo Alcala FXStreet

The Australian Dollar (AUD) accelerated its uptrend against the US Dollar (USD) on Wednesday, breaching previous highs at the 0.7225 area and hitting levels near 0.7270 for the first time since June 2022. News that the US and Iran would be close to a peace agreement has boosted risk appetite, sending the safe-haven USD tumbling.

Investors have celebrated a report by the Axios news agency, which cites two US officials and other sources related to the matter, to suggest that Washington and Tehran are closing in on a one-page memorandum to put an end to the war.

Previously, US President Donald Trump put Operation Freedom to escort vessels through the Strait of Hormuz on hold, after liberating three ships in two days. Furthermore, US Secretary of State Marco Rubio affirmed at a press conference on Tuesday that the US had achieved all the objectives of the war and that the offensive phase was over, suggesting that the US is not willing to resume hostilities.

Australian data support the Aussie

On the economic docket, Australian AiG Industry Index data released earlier on Wednesday has shown a significant improvement to -24.4 in March from a nearly two-year low at -34.2 in February, highlighting some stabilisation of factory activity. The Aussie appreciated following the data.

On Thursday, Australian Trade Balance figures from March will be observed with interest to assess the impact of the Middle East conflict on international trade, which accounts for nearly the 50% of the country’s Gross Domestic Product (GDP).

Before that, the US ADP Employment Change will provide the first glimpse of April’s labour market. ADP’s figures, which are expected to show a moderate growth in job creation, will set the stage for Friday’s Nonfarm Payrolls report, which is expected to put the Federal Reserve’s (Fed) hawkish turn into context.

(This story was corrected on May 6 at 12:10 GMT to say that the session high near 0.7220 is the highest level since June 2022, not August, and that Wednesday's AiG Industry Index was for March and not from April, as previously reported.)

Economic Indicator

ADP Employment Change

The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.

Economic Indicator

Trade Balance (MoM)

The trade balance released by the Australian Bureau of Statistics is the difference in the value of its imports and exports of Australian goods. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand. Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.

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EUR/USD stays weak below 1.1450 after German, EU PMI data

EUR/USD struggles to stage a rebound and trades below 1.1450 in the European session on Tuesday, after the data from Germany showed that the Composite PMI declined to 48 in June from 48.8 May, while that from the Eurozone rose to 49.5. Meanwhile, the US Dollar holds the upper hand against the Euro amid risk-off sentiment and a hawkish Fed outlook, leaving the pair on the defensive. Traders now await the US PMI data.

Gold drops to nearly two-week low, seems vulnerable amid Fed hike bets, bullish USD

Gold adds to its Asian session losses, and drops to a nearly two-week low, around the $4,115 region in the last hour amid a bullish US Dollar. Despite positive signals from US-Iran peace talks, widespread skepticism remains toward a final deal. This helps the USD in preserving its recent strong gains to the highest level since May 2025.

Bears cap Solana below $75 as ETF, retail demand wanes

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Big day of PMIs ahead

In the euro area, June flash PMIs are released. Most respondents will likely have answered after the US-Iran deal, yet the impact of lower oil prices is unlikely to already show up in activity data. We expect manufacturing to edge down to 50.9 (May: 51.6), while we expect services to see a modest improvement to 48.8 (May: 47.7).

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