AUD/USD rebounds as US-Iran deal hopes boost risk sentiment and temper Dollar strength

• AUD/USD rebounds after a gap-down open as hopes for a US-Iran deal support sentiment.
• US Dollar eases as DXY retreats from near 99.00 after early-week strength.
• RBA’s hawkish stance and upcoming employment data keep interest rate expectations in focus.

AUD/USD stages a sharp reversal on Monday after opening the week with a gap lower, as investors reassess evolving geopolitical developments in the Middle East and the prospects for a US-Iran deal. The rebound comes as hopes that a deal could still be reached improve market mood, lifting the risk-sensitive Australian Dollar (AUD) while putting pressure on the US Dollar (USD).

At the time of writing, AUD/USD is trading around 0.7089, rebounding from an intraday low near 0.6990. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 98.54, easing from intraday highs near the 99.00 level.

US President Donald Trump said during a press conference at the Oval Office on Monday that the United States has been contacted by “the right people” in Iran, signaling potential room for renewed negotiations. “We’ve been called by the other side,” he told reporters. “They’d like to make a deal very badly.”

These remarks come after Trump ordered a naval blockade targeting Iranian ports following a weekend of US-Iran talks that ended without a breakthrough.

Looking ahead, traders will closely monitor evolving geopolitical developments in the Middle East, particularly any signs of de-escalation and the potential reopening of the Strait of Hormuz, as elevated Oil prices continue to fuel inflation concerns and complicate the monetary policy outlook for major central banks.

In the US, the impact of rising Oil prices was clearly evident in the March inflation data, with headline CPI increasing by 0.9% MoM from 0.3% in February, while the annual rate rose to 3.3% YoY from 2.4%. The stronger inflation print has reinforced expectations that the Federal Reserve will hold interest rates steady in the coming months.

In Australia, the Reserve Bank of Australia (RBA) has maintained a hawkish stance amid persistent inflation pressures, with inflation remaining above the central bank’s 2%-3% target range. The RBA has already raised interest rates twice this year, and Australia’s employment data due on Thursday could influence interest rate expectations going forward.

Traders will also closely monitor China’s trade balance data on Tuesday, given Australia’s strong economic ties with China, which make the Aussie particularly sensitive to developments in the world’s second-largest economy.