• AUD/USD strengthens as optimism around renewed talks between Washington and Tehran boosts risk appetite.
• Softer-than-expected US producer inflation data eases pressure on US monetary policy.
• Warnings from Australia’s central bank about stagflation risks temper the economic outlook.

AUD/USD rises on Wednesday and trades around 0.7140 at the time of writing, up 0.28% on the day. The pair benefits from an improved risk environment after reports suggested that new discussions could take place between the United States (US) and Iran before the two-week ceasefire expires.

According to several media reports, US President Donald Trump signaled that negotiations could resume as early as this week. Vice President JD Vance also cited “significant progress” during an initial round of talks held in Pakistan, adding that follow-up meetings could take place in the coming days. Hopes of geopolitical de-escalation are reducing demand for safe-haven assets and supporting risk-sensitive currencies such as the Australian Dollar (AUD).

At the same time, the latest inflation data from the United States weighed on the US currency. The Producer Price Index (PPI) rose 0.5% MoM in March, well below the market consensus of 1.2%. Core PPI increased by just 0.1%. On an annual basis, the headline reading reached 4%, below the expected 4.6%, reinforcing the view that inflationary pressures may be easing.

These figures strengthen expectations that the Federal Reserve (Fed) may not need to tighten monetary policy, which limits the appeal of the US Dollar (USD) and supports AUD/USD gains.

Domestically, the Reserve Bank of Australia (RBA) remains cautious. Deputy Governor Andrew Hauser warned that the months ahead could be challenging for the Australian economy, citing an energy crisis fueled by the Middle East war alongside persistent inflation pressures. According to Hauser, these factors increase the risk of a stagflation-like scenario.

Meanwhile, consumer confidence in Australia deteriorated sharply in April, with the Westpac survey showing a 12.5% drop, reflecting concerns over rising energy costs and global economic uncertainty.

Investors are now turning their attention to upcoming macroeconomic releases, including Australia’s employment report and China’s growth data, which could provide the next major catalysts for the Aussie.