Australian Dollar: Modest upside bias into 12 months – Rabobank

Rabobank’s Senior FX Strategist Jane Foley has highlighted a modest upside bias for the Australian Dollar (AUD) over the next 12 months, attributing this trend to a softer US Dollar (USD) and expectations of further Reserve Bank of Australia (RBA) rate hikes. Foley notes that AUD/USD has been gradually trending upward since the start of July, primarily due to the weaker USD and the fact that the Australian Dollar is currently in the mid-range compared to its G10 peers.

The key drivers for this outlook include strong labor data and softer Q2 Consumer Price Index (CPI). Although there is a risk of a November rate hike, Foley has raised her 3-month AUD/USD forecast to 0.71 from 0.70. While the AUD's near-term movements will continue to be influenced by RBA policy expectations and inflation risk, today's positive trade data release provides a glimpse into the country's structural economic developments.

However, the immediate impact of this news on the AUD is expected to be overshadowed by the upcoming RBA policy guidance on August 11.