USD/AUD Outlook:
The USD/AUD rate is currently below its recent average and near its recent lows, limiting upward movement. Weakness in the US dollar due to recent economic data and ongoing geopolitical risks is contributing to this outlook.
Key drivers:
• Rate gap: The Federal Reserve's recent rate hikes have attracted capital to the USD, though expectations of future cuts may lessen its appeal compared to the Reserve Bank of Australia's tightening measures.
• Risk/commodities: Geopolitical uncertainty has caused volatility in oil prices, negatively impacting the AUD as traders seek safety in the USD.
• One macro factor: Ongoing inflation concerns in Australia have increased the likelihood of further rate hikes from the RBA, supporting the AUD.
Range:
USD/AUD is likely to drift within its recent range as pressure on the USD continues, while the AUD remains supported by local monetary policy.
What could change it:
• Upside risk: A significant improvement in US economic data could boost the USD.
• Downside risk: Continued geopolitical tensions may drive investors to seek safe-haven assets, weakening the AUD further.
