Australian Dollar holds losses following China CPI data

AUD/USD halts its four-day winning streak, trading around 0.7070 during the Asian hours on Friday. However, the pair is up over 2.5% on the week at the time of writing. The pair remains subdued following the release of Chinese Consumer Price Index (CPI) data for March, given China’s close trade relationship with Australia. Focus shifts to the US CPI inflation report due later in the North American session.

China’s Consumer Price Index increased 0.9% in March year-over-year (YoY), against a rise of 1.3% in February. The market consensus was for 1.2% in the reported period. Chinese CPI inflation fell to -0.7% MoM in March, down from 1.0% previously.

The AUD/USD pair depreciates as the US Dollar (USD) receives support from safe-haven demand after uncertainty over the United States (US)-Iran ceasefire’s durability resurfaced. Israeli Prime Minister Benjamin Netanyahu said Israel will begin direct talks with Lebanon soon, while continuing strikes on Hezbollah.

Senior officials are set to meet in Pakistan this weekend over a potential long-term deal with Iran, as a fragile two-week ceasefire largely holds. Meanwhile, Iranian Foreign Ministry spokesperson Esmaeil Baghaei said talks depend on US adherence to ceasefire commitments, including halting hostilities in Lebanon, an interpretation rejected by Washington and Israel.

However, the Iran conflict continues to dominate market sentiment. Disruptions in the Strait of Hormuz have driven oil prices higher, fueling inflation concerns and altering interest rate expectations worldwide. The International Monetary Fund warned that the conflict could leave lasting economic damage, while elevated energy costs raise the risk of stagflation.

The AUD/USD pair’s outlook remains highly sensitive to geopolitical developments. While RBA hawkishness provides underlying support, the pair’s trajectory will largely depend on global risk sentiment, oil price dynamics, and the evolving Iran situation.