• AUD/USD posts a modest decline despite improving Australian PMI data.
• Rising tensions between the United States and Iran dampen risk appetite.
• US Jobless Claims and PMI data may provide short-term direction.

AUD/USD trades around 0.7140 on Thursday, down 0.27% on the day, moving within a tight range as market sentiment remains pressured by geopolitical tensions.

The Australian Dollar (AUD) struggles to benefit from supportive domestic data. S&P Global’s Purchasing Managers Index (PMI) reports show manufacturing activity returning to expansion territory, while the services sector also rebounds. However, these positive signals are offset by a still-uncertain outlook, marked by weak demand and rising costs.

The main source of pressure comes from the global backdrop. Escalating tensions between the United States (US) and Iran are fueling risk aversion, following incidents in the Strait of Hormuz and the lack of progress in peace negotiations. This environment supports demand for safe-haven assets and weighs on risk-sensitive currencies such as the AUD.

According to Société Générale, the Australian Dollar remains particularly vulnerable in this context due to its reliance on imported petroleum products. The bank highlights that this exposure could amplify AUD volatility, especially in the event of prolonged supply disruptions.

On the US side, the latest labor market data shows Initial Jobless Claims rising slightly to 214K, above expectations. However, the release has had a limited impact on the US Dollar (USD), as investors remain primarily focused on geopolitical developments and Oil price dynamics.

Meanwhile, the US Dollar is supported by higher Treasury yields and reduced expectations of Federal Reserve (Fed) rate cuts. The US Dollar Index (DXY) is moving higher, reflecting this trend.

In this environment, AUD/USD remains highly sensitive to geopolitical headlines and upcoming macroeconomic releases, particularly the US PMI figures due later in the day, which could provide further clues on monetary policy expectations.