With markets cautiously embracing the possibility of a ceasefire between Iran and Israel, risk sentiment is beginning to stabilize. If geopolitical tensions continue to cool regardless of whether the ceasefire is formally confirmed global investors will likely continue rotating back into risk assets.

The Australian dollar (AUD), as a high-beta currency tied to global growth, commodities, and risk sentiment, tends to outperform during periods of easing geopolitical stress. At the same time, the U.S. dollar (USD), which saw strong safe-haven demand during the height of Middle East tensions, is now showing signs of unwinding as that fear premium fades.

Additionally, commodity markets are retracing lower, and iron ore Australia’s key export remains supported by Chinese stimulus expectations, which could further underpin AUD strength. On the rates side, markets are also starting to reassess the Fed’s trajectory, with softer U.S. data weakening the case for prolonged dollar strength.

In short: Less war risk, stable commodities, improving global sentiment, and a recalibrating Fed all align in favor of AUDUSD upside in the short to medium term.

LONG AUDUSD

Jun 24 2025