AUD/USD recovery stalls below 0.6950 with all eyes on the Iran war

AUD/USD remains bid on Tuesday but is struggling to extend beyond 0.6950.
Traders are reluctant to sell the USD as the deadline on Iran looms.
Australian data revealed that inflation accelerated sharply in March.

Guillermo Alcala FXStreet

The Australian Dollar (AUD) is trading higher against the US Dollar (USD) for the second consecutive day on Tuesday, but the pair failed to find any significant acceptance above 0.6950. The AUD, so far, holds gains above 0.6930, yet with upside attempts limited amid cautious markets as the US ultimatum on Iran enters critical hours.

US President Donald Trump ramped up its threats to the Islamic Republic, affirming that the US army can take a country in one night and that that night might be tonight. Tuesday, 8:00 PM ET (00.00 GMT on Wednesday) is the latest deadline to reopen the Strait of Hormuz.

On Monday, Iran and the US rejected a plan for a 45-day ceasefire submitted by Pakistan, and Tehran came out with a 10-point roadmap for a steady peace agreement. Trump described those ideas as “significant,” but said they are not enough.

Australian inflation surges in March

Earlier on the day, Australia’s TM-MI Inflation Gauge posted its sharpest monthly advance in history, with a 1.3% gain in March, following a 0.2% decline in February. Likewise, the yearly rate accelerated to 4.3%, its highest level in more than two years, from February’s 3.6%.

These figures reflect the inflationary pressures stemming from higher energy prices amid the war in Iran, and add pressure on the Reserve Bank of Australia (RBA) to keep tightening its monetary policy.

In the US, the Durable Goods orders data from February, due later on Tuesday, predates the war on Iran and therefore is likely to have a limited impact on the USD. The highlight of the week will be Wednesday’s Federal Open Market Committee’s (FOMC) minutes to assess the calendar for the Fed’s next rate hike.

Economic Indicator

TD-MI Inflation Gauge (MoM)

The TD-MI inflation gauge, released by Melbourne Institute, is designed to provide a timely and accurate monthly measure of inflation in Australia. Based on the Australian Bureau of Statistics methodology for calculating the quarterly consumer price index, the Melbourne Institute Monthly Inflation Gauge estimates month-to-month price movements for a wide-ranging basket of goods and services across the main capital cities of Australia. The MoM figure compares the prices of goods in the reference month to the previous month. The higher the inflation, the stronger the effect it will have on the probability of an interest-rate hike by the RBA. Generally speaking, a high reading should be taken as positive, or bullish, for the AUD, while a low reading is seen as negative or bearish.

Economic Indicator

TD-MI Inflation Gauge (YoY)

The TD-MI inflation gauge, released by Melbourne Institute, is designed to provide a timely and accurate monthly measure of inflation in Australia. Based on the Australian Bureau of Statistics methodology for calculating the quarterly consumer price index, the Melbourne Institute Monthly Inflation Gauge estimates month-to-month price movements for a wide-ranging basket of goods and services across the main capital cities of Australia. The YoY reading compares prices in the reference month to a year earlier. The higher the inflation, the stronger the effect it will have on the probability of an interest-rate hike by the RBA. Generally speaking, a high reading should be taken as positive, or bullish, for the AUD, while a low reading is seen as negative or bearish.

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