USD/AUD Outlook: Bearish, as the rate is below its recent average and near recent lows due to multiple pressures on the USD.
Key drivers:
• Rate gap: The Federal Reserve may implement rate cuts in 2026, while the Reserve Bank of Australia is signaling potential interest rate hikes, widening the gap in monetary policy.
• Risk/commodities: High metals prices and strong demand for commodities are supporting the Australian dollar's strength.
• One macro factor: A surprising drop in Australia's unemployment rate has fueled expectations of rate hikes, further bolstering the AUD.
Range: The USD/AUD is likely to drift within its recent range, as it remains below its average and somewhat stagnant.
What could change it:
• Upside risk: A higher-than-expected core PCE price index could increase Fed rate hike speculations, potentially strengthening the USD.
• Downside risk: Renewed concerns about US-EU trade tensions may lead to further pressure on the USD, pushing the rate lower.