• AUD/USD extends gains for a fourth straight day as a weaker US Dollar supports the pair.
• Cautious mood persists as doubts emerge over the durability of the US-Iran ceasefire.
• Focus shifts to US CPI and upcoming US-Iran talks.

AUD/USD edges higher on Thursday, extending gains for a fourth straight day as hopes of de-escalation following the US–Iran ceasefire keep the US Dollar (USD) on the defensive, lending support to the Australian Dollar (AUD). At the time of writing, AUD/USD is trading around 0.7087, hovering near three-week highs.

The Greenback came under heavy selling pressure on Wednesday after the US and Iran agreed to a two-week ceasefire. The initial optimism around the truce helped ease market stress, but it proved short-lived after Iran said three parts of the agreement had already been violated following Israeli strikes on Lebanon, raising questions over whether the ceasefire will hold.

As a result, the broader mood remains cautious rather than fully risk-on. Against this backdrop, risk-sensitive currencies like the Australian Dollar remain driven by US Dollar dynamics, even as a hawkish Reserve Bank of Australia (RBA) outlook provides underlying support.

Attention now turns to US-Iran talks scheduled for the weekend in Pakistan. According to NBC, citing a US official, President Donald Trump has urged Israel to ease strikes on Lebanon to help ensure the success of negotiations with Iran. Meanwhile, Israeli Prime Minister Benjamin Netanyahu said direct talks with Lebanon will begin soon, focusing on disarming Hezbollah and establishing peace.

Beyond geopolitical developments, the latest US economic data showed mixed signals. Core Personal Consumption Expenditures (PCE) inflation rose by 0.4% MoM in February, in line with expectations, while the annual rate eased to 3.0% from 3.1%. At the same time, the final Q4 Gross Domestic Product (GDP) growth was revised lower to 0.5% from 0.7%.

Traders now await the US Consumer Price Index (CPI) data due on Friday, with economists expecting headline CPI to rise by 0.9% MoM, up from 0.3% in February, while annual inflation is seen accelerating to 3.3% from 2.4%.

Meanwhile, the Federal Reserve’s (Fed) Minutes from the March meeting, released on Wednesday, highlighted a two-sided view. “Most participants,” said that a prolonged conflict in the Middle East could weaken labor market conditions, which may warrant additional rate cuts. At the same time, “many participants” flagged the risk of inflation staying elevated for longer, especially if Oil prices continue to rise, which could call for rate hikes.