AUD/USD dips to 2-month lows on Middle East concerns

Today’s headlines

What’s happening: The Australian dollar traded lower against the US dollar this morning as investors assessed the latest developments in the ongoing Middle East conflict.

What happened: Investors remained cautious ahead of US President Donald Trump’s deadline for Iran to reopen the Strait of Hormuz.

Strength in the US dollar also weighed on the AUD/USD forex pair, which traded near two-month lows this morning.

Why it matters: The ongoing Middle East conflict has led to risks of the Strait of Hormuz being closed for longer, driving energy prices significantly higher and providing a boost to the greenback as a safe-haven asset.

After issuing several deadlines, the US President warned of the “complete demolition” of Iran’s power plants and bridges if the Strait of Hormuz is not fully reopened by 8pm ET today (0400 UAE time, Wednesday).

The US President also singled out Australia as one of several allies unwilling to be involved in the Iran war, while Australia issued an official statement calling for an “urgent de-escalation” of the war and holding back on “unhelpful” threats.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained more than 0.1% to 100.12 this morning.

Data released this morning showed that the S&P Global Australia composite PMI declined to 46.6 in March from 52.4 in the previous month. The figure also missed market estimates of 47. This signalled the first contraction in the private sector in more than a year.

Australia’s services PMI business activity index slipped to 46.3 in March from 52.8 in February, recording the sharpest plunge since November 2023.

Australia’s Monthly Inflation Gauge rose 1.3% in March following a 0.2% decline in the previous month. March’s reading was the strongest growth on record.

ANZ-Indeed Australian job ads declined 3.1% in March compared to the previous month’s 16-month high of 3.2% and recording the first contraction in three months. Household spending in Australia climbed 0.3% in February, representing the second straight month of growth.

The AUD/USD pair fell around 0.3% to 0.6899 this morning, while the S&P/ASX 200 gained 1.3% to trade at 8,690.90.

What to watch: Investors will keep an eye on the deadline issued by Trump regarding reopening the Strait of Hormuz.

Data on building permits and private house approvals from Australia will be released on Friday. Analysts expect the number of total dwellings approved in Australia to jump by 29.7% to around a five-year high of 19,022 units in February, following a 7.2% decline in the previous month. Private house approvals in Australia are expected to rise by 0.2% to 9,847 units in February versus a 1.7% gain in the previous month.

The markets today

US stocks in focus today ahead of some major economic reports

Context: US stock markets closed higher on Monday even amid rising concerns over the prolonged Middle East conflict.

Details: Investors remained cautious following Trump’s warning of strikes on civilian infrastructure and power plants inside Iran in case the Strait of Hormuz is not reopened.

Crude prices remained close to multi-year highs, raising inflation concerns and prompting investors to scale back speculations of any interest rate cuts by the Federal Reserve.

Tech stocks rose sharply on Monday. Marvell Technology’s stock jumped after news of Nvidia making a $2 billion investment in the company. Shares of Seagate Technologies surged to a record high, after Morgan Stanley analysts said the stock was their “top pick” in the sector. Gains in Apple and Amazon also helped the Nasdaq 100 record gains.

The Dow Jones index rose 0.36%, or 165.21 points to settle at 46,669.88 on Monday, while the S&P 500 gained 0.44% to 6,611.83 and the Nasdaq 100 moved up 0.54% to close at 21,996.34.

What to watch: Investors will continue monitoring the ongoing Middle East war, which is expected to significantly impact the equity markets ahead.

Data on ADP employment change (1615 UAE Time), durable goods orders (1630 UAE Time), consumer inflation expectations (1900 UAE Time) and consumer credit change (2300 UAE Time) will be released by the US today.

Other Markets: Asian stock indices traded mostly lower today, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng down by 0.05% and 0.70%, respectively, while China’s Shanghai index rose 0.03%.

The news shaping the markets

Ukraine stepped up its attacks on Russia’s oil network despite calls from Western allies to end such attacks. The news sent the USD/RUB pair lower in forex trading this morning.

Philippines’ annual inflation rate accelerated to 4.1% in March, from 2.4% in the previous month. The latest reading being the highest level since July 2024 lent support to the USD/PHP forex pair.

Japan’s foreign reserves declined by $35.97 billion to $1.37 trillion in March. This being the lowest reading since December 2025 sent the USD/JPY pair higher in forex trading this morning.

Canada’s S&P Global services PMI business activity index surged to 47.2 in March from 46.5 in the previous month. Services activity remaining in the contraction zone lent support to the USD/CAD forex pair.

Mexico’s gross fixed investment dipped 3.3% year-over-year in January, coming in worse than market estimates of a 2.1% decline, which sent the USD/MXN pair higher in forex trading this morning.

What else to watch today

Eurozone’s S&P Global composite PMI (1200 UAE Time) and S&P Global services PMI (1200 UAE Time). UK’s new car sales (1200 UAE Time), S&P Global composite PMI (1230 UAE Time) and S&P Global services PMI (1230 UAE Time), Singapore’s foreign exchange reserves (1300 UAE Time), Russia’s foreign exchange reserves (1700 UAE Time), Brazil’s car production (1800 UAE Time), new car registrations (1800 UAE Time) and balance of trade (2200 UAE Time), Canada’s Ivey PMI (1800 UAE Time), as well as Turkey’s treasury cash balance (1830 UAE Time).