AUD/USD Outlook: The Australian dollar is likely to increase as it currently trades above its recent average, close to recent highs, bolstered by strong employment data and rising interest rate expectations.
Key drivers:
• Rate gap: The Reserve Bank of Australia is considering interest rate hikes to combat rising inflation, contrasting with the Federal Reserve’s anticipated rate cuts in the near future.
• Risk/commodities: While global oil prices remain relatively stable, the AUD is supported by high metals prices, integral to Australia’s export economy.
• One macro factor: Australia’s unemployment rate dropped to 4.1%, significantly lower than expectations, indicating a robust economy that could prompt further RBA policy tightening.
Range: The AUD/USD is likely to drift upwards within the recent range as positive economic data continues to support the currency.
What could change it:
• Upside risk: A surprising increase in commodity prices could strengthen the AUD further.
• Downside risk: Stronger-than-expected U.S. inflation data could bolster the USD and challenge the AUD's position.
