The current market bias for the USD to AUD exchange rate is bearish.
Key drivers include:
- Interest rate differentials, where the Reserve Bank of Australia is expected to raise rates amidst concerns of rising inflation, contrasting with anticipated rate cuts from the Federal Reserve in 2026.
- Improving global economic outlook and rising commodity prices could support the AUD against the USD.
- Australia's positive economic forecast, driven by its commodity exports, aligns with the expectation of a stronger AUD.
In the near-term, expect the USD to AUD trading range to remain stable, potentially fluctuating within its recent levels.
An upside risk could arise from unexpected economic data supporting the Australian economy, while a downside risk may come from escalated global tensions that prompt investors to favor the USD as a safe-haven.