AUD/USD maintains upward momentum even after today’s retracement – Rabobank

AUD/USD Outperforms as RBA Maintains Cautious Stance

The Australian dollar against the US dollar (AUD/USD) has been the top performer among G10 currencies so far this year. This strength has been fueled by expectations that the Reserve Bank of Australia (RBA) might lead the way in raising interest rates. However, recent remarks from Deputy Governor Hauser indicate that the central bank may proceed more carefully than previously anticipated. According to Jane Foley, FX analyst at Rabobank, although a short-term pullback toward 0.66 is possible as rate hike expectations are adjusted, Australia’s robust economic and fiscal backdrop suggests AUD/USD could climb toward 0.69 over the coming year.

Market Optimism Meets RBA Prudence

Since late November, AUD/USD has been trending upward. Despite a weaker showing today, the Australian dollar remains the strongest G10 currency year-to-date, largely due to speculation that the RBA could be the first major central bank to tighten policy in response to persistent inflation.

Nevertheless, this narrative was tempered by Deputy Governor Hauser’s comments earlier today, which signaled that the RBA may adopt a more measured approach in addressing inflationary pressures. Rabobank anticipates that the central bank will move more slowly on policy tightening than markets currently expect.

Australia’s Economic Strength Supports AUD

Compared to other G10 nations, Australia enjoys solid fiscal health and a positive growth forecast. These fundamentals are likely to attract diversification flows into the AUD in the months ahead. While there is potential for AUD/USD to retreat to the 0.66 level in the next one to three months as expectations for RBA rate hikes are recalibrated, Rabobank maintains a positive outlook for the currency pair, projecting a move up to 0.69 over a 12-month horizon.