The Australian Dollar (AUD) extended its gains against the US Dollar (USD) on Wednesday, reaching 0.6950 from Tuesday's low of 0.6833, driven by increased risk appetite amid optimism for a swift resolution to the Iran war [1]. US President Trump stated on Tuesday that he plans to end the war in the Middle East within the next two or three weeks, even if a deal with Tehran remains elusive. He also expects the Strait of Hormuz to reopen 'automatically' once the attacks cease [1].
Global equity markets responded positively to these developments, with Asian markets closing with strong gains and most European indexes advancing by nearly 2% at the time of writing. Wall Street futures also pointed higher. In contrast, oil prices and the US Dollar declined, while risk-sensitive assets such as the AUD outperformed [1].
Despite mixed Australian economic data, the AUD's recovery remained robust. February saw a stronger-than-expected rebound in Building Permits, but the S&P Manufacturing PMI indicated contraction in the sector, underscoring the negative impact of the war [1]. The hawkish tone from the Reserve Bank of Australia's March monetary policy meeting minutes was somewhat questioned by these mixed figures [1].
Looking ahead, the US economic calendar is set to intensify with the release of March's ADP Employment Change, ISM Manufacturing PMI, and February's Retail Sales figures. These data points are expected to influence market sentiment ahead of Friday's Nonfarm Payrolls report, which is forecasted to show a solid improvement in net jobs following February's 92,000 decline [1].
CONCLUSION
The AUD/USD pair has rallied on the back of improved global risk sentiment and hopes for a swift end to the Iran war, with equity markets and risk-sensitive assets outperforming. Despite mixed domestic data, the AUD remains strong, while upcoming US economic releases are likely to further shape market direction. Overall, the market is responding positively to geopolitical optimism and expectations for improved US employment figures.