Can AUD/USD extend gains as oil risks ease?
AUD/USD finished lower last week at 0.7148 (-0.27%), snapping a three‑week winning streak. The pullback came as traders squared up long positions ahead of Wednesday’s key domestic consumer price index (CPI) release and a packed central bank calendar. Higher energy prices and the lack of meaningful progress on the Middle East conflict also weighed on the pair, offering fresh support to the United States (US) dollar.
The weekend brought a fresh twist in the Middle East conflict when US President Trump abruptly cancelled the planned US envoy trip to Pakistan for peace talks, citing unnecessary costs and a disappointing offer from Tehran. He added bluntly, ‘If they want to talk, they can come to us, or they can call us.’
In a Fox News interview overnight, Trump increased the pressure, warning that Iran is rapidly running out of time. ‘When you have lines of vast amounts of oil pouring through your system … what happens is that line explodes from within, both mechanically and in the earth … They say they only have about three days left before that happens.’
This was a reference to Iran’s ageing onshore oil fields, where storage facilities are expected to reach maximum capacity this week. Forced shut‑ins would risk irreversible long‑term damage to reservoirs and a major blow to future production and revenue.
With the clock ticking down on this potentially catastrophic development, reports emerged this morning that Iran is now willing to prioritise the reopening of the Strait of Hormuz and an end to the naval blockade before deeper nuclear negotiations.
While it is difficult to see the US accepting anything less than a comprehensive deal, one that permanently opens the Strait of Hormuz and addresses Iran’s nuclear weapons program, this development was enough to support a rebound in US equity futures and AUD/USD today. After dipping to a low of 0.7124 this morning, the Aussie is now trading 0.35% higher at 0.7173, sitting just 48 pips (-0.66%) below its mid‑April high of 0.7221.
Key drivers ahead
Looking ahead beyond the ongoing Middle East drama, the key drivers for AUD/USD and broader risk sentiment will be a heavy week for the US corporate earnings season, featuring major technology companies including Apple, Microsoft, Amazon, Alphabet and Meta, alongside a packed calendar of central bank meetings.
While all major central banks are expected to stay on hold, investors should expect distinctly hawkish commentary around the Middle East conflict and the reality of higher energy prices, which are likely to drive sharp increases in inflation in the months ahead. Closer to home, Wednesday’s Australian March CPI report, previewed below, will be the key domestic event.
AU: CPI
Date: Wednesday, 29 April at 11.30am AEST
February saw a modest easing in headline inflation pressures. Headline CPI fell to 3.7% year-on-year (YoY) in February, down from 3.8% previously, while the Reserve Bank of Australia’s (RBA) preferred trimmed‑mean measure held steady at 3.3%.
Looking ahead to Wednesday’s March release, headline CPI is expected to surge to 4.8% YoY, while the trimmed‑mean measure is forecast to rise to 3.4%. On a quarterly basis, the trimmed‑mean is expected to increase to 3.5%, leaving all three measures well above the midpoint of the RBA’s 2% – 3% target band.
This print arrives just days before the RBA’s next board meeting on 5 May, where a third consecutive 25 basis point (bp) rate hike is widely anticipated. The Australian rates market is currently pricing in around 20 bp of tightening for that meeting, with a total of 60 bp of hikes expected for the remainder of 2026.
