AUD/USD steadies as Trump delays Iran strikes, risk sentiment improves

AUD/USD trades little changed on Monday after recovering from earlier losses, following US President Donald Trump's decision to delay planned strikes on Iran’s energy infrastructure, easing immediate geopolitical tensions and improving overall risk appetite.

At the time of writing, the pair is trading around 0.7018, bouncing from an intraday low of 0.6996, its weakest level since February 6.

The rebound reflects easing safe-haven demand for the US Dollar (USD), as improving risk sentiment encourages flows into risk-sensitive currencies like the Australian Dollar (AUD), helping it recover from multi-week lows.

In a Truth Social post, Trump said he had instructed the Department of War to postpone strikes on Iranian power plants for five days, pending the outcome of ongoing discussions.

However, the pair lacks strong follow-through buying, as uncertainty surrounding the Middle East conflict remains elevated. Iranian officials have downplayed the prospects of negotiations, stating that no talks have been held with the United States.

The conflicting headlines continue to keep markets on edge, although Oil prices have retreated sharply following Trump’s comments. Still, the Strait of Hormuz remains effectively closed, with investors closely monitoring developments in the Middle East for any potential breakthrough.

Oil-driven inflation concerns continue to dominate market sentiment, adding to existing price pressure in Australia. The latest energy shock is likely to keep the Reserve Bank of Australia (RBA) on a tightening path, after the central bank raised its cash rate to 4.10% last week, following an earlier increase to 3.85% in February.

Attention now shifts to Australia’s inflation data for February, due later this week. However, the release is unlikely to fully capture the recent surge in price pressure, as it predates the latest escalation in Middle East tensions and the sharp rise in energy prices.

Traders have also sharply repriced Federal Reserve (Fed) interest rate cut expectations, now anticipating a prolonged pause, compared to earlier bets of at least two rate cuts by year-end.

At last week’s meeting, the Fed held interest rates steady in the 3.50%–3.75% range, while the updated dot plot continued to signal one rate cut in 2026, even as inflation projections were revised higher.

Looking ahead, preliminary S&P Global Purchasing Managers Index (PMI) data for March from both Australia and the United States, due on Tuesday, will offer an early read on how the conflict is beginning to filter through the global economy.