• AUD/USD declines sharply, trading around 0.6950, down 0.82% on the day.
• Geopolitical tensions in the Middle East revive safe-haven demand.
• Weak Australian PMI data adds further pressure on the Australian Dollar.

AUD/USD falls sharply on Tuesday, trading around 0.6950 at the time of writing, under pressure amid a renewed wave of risk aversion across global markets, supporting safe-haven assets, particularly the US Dollar (USD).

Geopolitical tensions in the Middle East are currently driving market sentiment. US President Donald Trump announced a five-day delay regarding a deadline linked to the Strait of Hormuz, while signaling to what he described as constructive discussions with Tehran. However, Iranian officials denied any negotiations, adding to the uncertainty. At the same time, fresh Israeli strikes on Tehran heighten fears of a prolonged conflict, prompting investors to reduce risk exposure and move into the Greenback.

This environment supports the US Dollar, which strengthens against its major peers, while risk-sensitive currencies such as the Australian Dollar (AUD) come under pressure.

In the United States (US), the latest preliminary S&P Global data paint a mixed picture of economic activity. The Manufacturing Purchasing Managers Index (PMI) rose to 52.4 in March, up from 51.6 in February and above market expectations. By contrast, the services sector showed signs of softening, with the Services PMI easing to 51.1 from 51.7 previously. Overall, the Composite PMI declined to 51.4, its lowest level since April last year, marking a second consecutive month of slowing growth.

The Aussie is also weighed down by weak domestic fundamentals. The latest preliminary Purchasing Managers Index (PMI) data released by S&P Global showed a significant deterioration in economic activity in March. The Composite PMI dropped to 47, returning to contraction territory after eighteen months of expansion, driven by a sharp decline in the services sector.

These indicators reinforce concerns about the strength of domestic demand in Australia, despite the hawkish stance recently adopted by the Reserve Bank of Australia (RBA), which raised its policy rate to 4.10%. While a tighter monetary policy could provide some support to the Aussie, it remains insufficient to offset the downside pressure stemming from the global backdrop.

Market attention now turns to the upcoming inflation data in Australia, which is due on Wednesday. However, in a context dominated by geopolitical risks, overall market sentiment is likely to remain the primary driver for the pair in the near term.