USD/AUD Outlook:
The USD/AUD is likely to decrease as the rate sits notably below its recent average and is near recent lows, mainly due to geopolitical uncertainty affecting the AUD.
Key drivers:
• Rate gap: The US Federal Reserve's tightening cycle continues compared to the Reserve Bank of Australia's relatively stable rates, enhancing USD attractiveness.
• Risk/commodities: Rising oil prices amid conflict fears hurt AUD, as Australia is a net energy importer, increasing its inflation risk.
• One macro factor: Australia's recent GDP growth was strong, but it did not bolster the AUD due to shifting risk appetite.
Range:
Expect the USD/AUD to hold within its recent range, as it grapples with mixed signals from economic data and geopolitical concerns.
What could change it:
• Upside risk: A shift towards resolution in the Middle East conflict could restore risk appetite and support the AUD.
• Downside risk: Continued geopolitical tensions and rising oil prices could exert further pressure on the AUD.
