AUD/XPF Outlook:
The outlook for AUD/XPF is slightly positive, but likely to move sideways. The rate is currently above its recent average and trading near recent highs, yet lacks a clear driver to push further.
Key drivers:
• Rate gap: The Reserve Bank of Australia's recent rate hike increases the interest rate advantage over the French monetary policy, supporting an appreciating AUD against the XPF.
• Risk/commodities: The strong recovery in commodity prices, especially gold, boosts the Australian economy, benefiting the AUD while maintaining interest from investors.
• One macro factor: Stubborn inflation in Australia raises expectations for further rate increases, which could strengthen the AUD over time.
Range:
The AUD/XPF is likely to hold within its recent 3-month range, with some potential to test the upper extremes.
What could change it:
• Upside risk: A surprising rise in inflation data could prompt a stronger response from the RBA, boosting the AUD further.
• Downside risk: A deterioration in global risk appetite due to geopolitical tensions may weaken the AUD and pressure the exchange rate lower.
