In a recent forecast by UBS, the Australian Dollar (AUD) is expected to strengthen significantly against the US Dollar (USD), potentially reaching 0.70 by mid-2026. This optimistic outlook comes as the AUD recently touched its highest level since November 2024 at 0.656, driven by positive global market sentiments.
The surge in the Aussie dollar has been largely attributed to a US-China trade truce and a reduction in geopolitical tensions, which have bolstered global risk appetite. These factors have created a favorable environment for risk-sensitive currencies like the AUD to thrive, according to UBS analysts.
However, the currency's upward trajectory has not been without challenges. Softer-than-expected monthly CPI data from Australia has posed headwinds, tempering aggressive bullish bets on the AUD. Despite this, UBS remains confident in the long-term potential of the currency pair.
Market watchers are also keeping an eye on external factors such as the dovish stance of the Federal Reserve, which could further support the AUD/USD pair. A less hawkish Fed often weakens the USD, providing an additional boost to the Aussie dollar.
UBS also highlighted the importance of ongoing economic recovery in China, a key trading partner for Australia. A robust Chinese economy could drive demand for Australian exports, further strengthening the AUD in the coming years.
For traders and investors, this forecast underscores the need to monitor geopolitical developments and macroeconomic data closely. The AUD/USD pair remains a dynamic and potentially lucrative opportunity as global economic conditions evolve.
Andrew Lee
