USD/AUD Outlook:
The outlook for USD/AUD remains slightly weaker, as it is currently trading below its recent average and near recent lows. The lack of strong drivers may keep the pair moving sideways in the short term.
Key drivers:
- Rate gap: The U.S. Federal Reserve has implemented recent rate hikes, widening the interest differential compared to the Reserve Bank of Australia, which recently raised rates but remains cautious.
- Risk/commodities: The recent downturn in global risk appetite can pressure the AUD, which often responds to shifts in investor confidence, especially amid geopolitical uncertainty.
- One macro factor: Sustained sticky inflation in Australia elevates the potential for further tightening, which could bolster the AUD against the USD if implemented timely.
Range:
Expect USD/AUD to drift within its recent range, struggling to test extrema without new influencing factors.
What could change it:
- Upside risk: A significant improvement in U.S. economic data, particularly if it weakens inflation expectations further.
- Downside risk: Prolonged geopolitical tensions or worsening global economic conditions that could erode demand for Australian exports.
