AUD/USD rallies on ceasefire optimism and commodity strength
AUD/USD finished higher last week at 0.7063 (up 2.45%), scoring its highest weekly close in six weeks and its best weekly gain since mid‑January.
The rally was underpinned by a sharp improvement in risk sentiment and higher commodity prices (gold, silver and copper) following last week’s United States (US)–Iran ceasefire agreement, alongside diverging central bank paths.
The Australian interest rate market is pricing in about 63 basis points (bp) of additional Reserve Bank of Australia (RBA) rate hikes this year, on top of the 50 bp already delivered. Meanwhile, in the US, faint hopes of a Federal Reserve (Fed) rate cut continue to weigh on the greenback.
Risk sentiment tested as talks fail and oil surges
However, some of the Aussie’s gains have since been trimmed. After more than 21 hours of negotiations in Pakistan over the weekend, the US and Iran failed to reach an agreement. The main sticking points remained Iran’s refusal to commit to halting its nuclear weapons development, along with its ongoing control of the Strait of Hormuz.
That outcome, combined with President Trump’s confirmation of a US naval blockade of the Strait, triggered a mild bout of risk aversion on the reopen. AUD/USD fell 1.1% to a low of 0.6983, but as of mid‑afternoon, the Aussie had bounced back to trade just 20 pips (-0.30%) lower on the day at 0.7040.
The resilient performance in AUD/USD comes despite a 9.66% surge in WTI crude oil to $104.88. The story here is telling: the oil market is aggressively pricing in further near‑term supply disruption from the blockade, whereas other risk assets, including equities and AUD/USD, appear to be taking the view that the blockade could ultimately lead to a lasting resolution of the current stalemate.
Looking ahead, the focus for AUD/USD this week will be split between ongoing developments in the Middle East and a handful of key macroeconomic data points. Offshore, traders will be watching Tuesday night’s producer price index (PPI) release, while the kick‑off to the US first quarter (Q1) earnings season, led by the large Wall Street banks, will also help steer broader risk sentiment.
Locally, the marquee event is Thursday’s Australian labour force report, previewed below.
Labour Force
Date: Thursday, 16 April at 11.30am AEDT
Last month, the February employment data delivered a solid 48,900 gain, comfortably beating the 20,000 consensus forecast. At the same time, the unemployment rate edged higher, rising from 4.1% to 4.3%, driven largely by a participation rate that climbed to a four‑month high of 66.9%.
Overall, this print highlighted a reversion of recent trends, with both jobs growth and measures of spare capacity increasing simultaneously. Crucially, it brought broader labour market trends more in line with the RBA’s February forecasts, meaning it was unlikely to shift the central bank’s underlying view that conditions remain somewhat tight.
Looking ahead to the March update, expectations point to a more moderate employment gain of roughly 15,000, with the jobless rate anticipated to hold steady at 4.3%. A materially softer outcome, particularly one where the unemployment rate spikes to 4.5% or higher, would help dial back the urgency for further RBA rate hikes later in the year.
The Australian interest rate market starts the week pricing in around 16 bp of tightening for the upcoming May board meeting, with a cumulative 63 bp of hikes priced in for 2026.
