Iran Denies Peace Talks, Triggering Risk-Off Wave; Australian PMI Collapses Unexpectedly, AUD Sold Off Sharply

Reuters Finance APP News — On Tuesday (March 24), during the Asian trading session, the Australian dollar remained weak, generally declining against major currencies. The AUD/USD pair fluctuated lower and is currently trading around 0.6970, down approximately 0.6% for the day. Iran firmly denied any peace negotiations with the United States, contrasting with U.S. President Trump’s earlier optimistic statements, reigniting market risk aversion and putting pressure on the Australian dollar.

Risk appetite declined, boosting the US dollar. The dollar index slightly rebounded to around 99.40, up about 0.2% intraday. As a typical risk-sensitive currency, the AUD often faces significant selling pressure when geopolitical uncertainties increase.

Geopolitical Impact

On Monday, U.S. President Trump announced he had instructed the Department of Defense to suspend military strikes on Iran’s power facilities for five days and stated that he was engaged in “very good and productive” talks with Tehran to resolve Middle East hostilities. This statement temporarily eased market tensions, leading to a decline in oil prices and a rebound in risk assets.

However, Iran quickly responded with a tough stance. Iranian Parliament Speaker Mohammad Bagher Qalibaf explicitly stated, “No negotiations with the United States,” and accused Trump of spreading false information to manipulate financial and oil markets.

Iranian state media also denied any direct or indirect dialogue, emphasizing that the war would continue until full damages are compensated. This reversal of stance rapidly reignited risk aversion, supporting the dollar and pressuring the AUD.

Australian Economic Data

Aside from geopolitical factors, domestic economic data in Australia also weighed on the AUD. The S&P Global March Purchasing Managers’ Index (PMI) preliminary reading showed a sharp decline to 47.0 from 52.4 in February, marking the first contraction in 18 months. The services activity index fell to 46.6, while the manufacturing PMI slightly decreased to 50.1.

A PMI below 50 indicates an overall contraction in business activity, mainly driven by a sharp decline in services output. Slowing new order growth, weaker employment gains, and concerns over supply chain disruptions have heightened market doubts about Australia’s economic outlook.

Investors are watching the release of Australia’s February Consumer Price Index (CPI) data on Wednesday. However, since this data does not fully reflect recent energy price increases triggered by the Iran conflict, its actual impact on the Reserve Bank of Australia (RBA) monetary policy expectations is expected to be limited.

Market Outlook and Risks

In the short term, the AUD faces dual pressures: ongoing geopolitical risks and weak domestic economic data. Key support levels are around 0.6900, with further downside potentially testing the psychological level of 0.6800. Resistance is seen in the 0.7050-0.7100 range.

Longer-term, the AUD’s trajectory will depend on developments in the Middle East, global economic growth prospects, and commodity prices. If tensions ease, risk sentiment could improve, benefiting the AUD; conversely, continued tensions could suppress it through energy prices and safe-haven demand. Traders should closely monitor U.S. economic data and RBA policy signals to manage risks.

(AUD/USD daily chart, Source: EasyForex)

Summary

Iran’s denial of peace talks with the U.S. reversed market expectations, reigniting risk aversion, while Australia’s March PMI preliminary data unexpectedly contracted, further weakening the AUD. The AUD/USD has retreated, with short-term downside pressure evident, but any positive developments in Middle East tensions could present a rebound opportunity.

Overall, current market conditions highlight the significant impact of geopolitical events on risk-sensitive currencies and the vulnerability of the Australian economy to external shocks.

As of 11:52 Beijing time, the AUD/USD is trading at 0.6965/66.

(Editors: Wang Zhiqiang HF013)

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