AUD/USD hesitates around 0.7150 as US-Iran tensions sour sentiment

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The Australian Dollar (AUD) edges lower against the US Dollar (USD) on Thursday.

AUD/USD wavers around 0.7050, halfway through the weekly range.
The positive Australian PMI figures have been offset by concerns about the US-Iran stalemate.
US jobless claims and preliminary PMI figures will provide some fundamental guidance later on the day.

The Australian Dollar (AUD) edges lower against the US Dollar (USD) on Thursday. Concerns about the lack of progress in the US-Iran peace process have offset the upbeat Australian Purchasing Managers’ Index (PMI) figures released during the Asian session, leaving the AUD/USD pair trapped within a tight range around 0.7150.

Australian preliminary S&P Global PMI figures for April showed that manufacturing activity returned to expansion territory, rising to 51.0 from 49.8 the previous month. Likewise, the Services PMI increased to 50.3 from 46.3 in March, although the weak demand and higher costs cloud the outlook for future business activity.

Geopolitical tensions dampen risk appetite

Meanwhile, news from the Middle East continues to drive markets on Thursday, and the latest reports are far from soothing. Iran has announced the seizure of two ships in the Strait of Hormuz, while the US military redirected at least three Iranian-flagged Oil tankers away from their positions in the Indian Ocean on Wednesday.

These actions, coupled with the lack of news about the second round of peace talks, which were scheduled to start this week, are raising concerns about the fate of the fragile ceasefire, and keeping demand for risk-sensitive assets, like the Australian Dollar, subdued.

In the US, the weekly jobless claims figures and the preliminary S&P Global PMIs, due later on Thursday, will give investors some entertainment to divert from the geopolitical crisis. Fresh claims for jobless benefits are expected to show a moderate increase. Services and manufacturing activity are seen expanding, despite the war in Iran.

Economic Indicator

S&P Global Manufacturing PMI

The Manufacturing Purchasing Managers Index (PMI), released on a monthly basis by S&P Global, is a leading indicator gauging business activity in Australia’s manufacturing sector. The data is derived from surveys of senior executives at private-sector companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the Australian Dollar (AUD). Meanwhile, a reading below 50 signals that activity among goods producers is generally declining, which is seen as bearish for AUD.

Economic Indicator

S&P Global Services PMI

The Services Purchasing Managers Index (PMI), released on a monthly basis by S&P Global, is a leading indicator gauging business activity in Australia’s services sector. The data is derived from surveys of senior executives at private-sector companies from the services sector. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), employment and inflation. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the Australian Dollar (AUD). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for AUD.