The USD to AUD exchange rate is currently bearish.
The main drivers include:
- The anticipated interest rate cuts by the Federal Reserve, with three additional cuts expected by mid-2026, pushing the USD down.
- Rising commodity prices are supporting the AUD as it increases demand for Australian exports.
- Strong expectations of RBA interest hikes in early 2026, spurring potential AUD strength.
In the near term, the USD/AUD pair is expected to trade within a relatively stable range above the current price.
An upside risk could arise from unexpected improvements in US economic data, such as a robust consumer sentiment report, which might reinforce the USD. On the downside, escalating geopolitical tensions or prolonged risk aversion could further diminish the AUD's strength against the USD, impacting its exchange rate.