**UBS Forecasts AUD/USD Rally: Eyes 0.70 Target by Early 2026**
*Original reporting credited to InvestingLive.com.*
UBS, a global investment bank and financial services company, has recently released an optimistic forecast for the Australian Dollar (AUD) against the US Dollar (USD), anticipating a rally in the AUD/USD currency pair. According to UBS strategists, the Aussie dollar could reach the 0.70 mark by early 2026—a level which suggests a significant appreciation from its current position. This projection is rooted in a comprehensive analysis encompassing monetary policy, domestic and global economic trends, commodity prices, and capital flows.
This comprehensive article explores UBS’s rationale behind the bullish outlook, integrating insights from additional sources, and offering investors a detailed understanding of the key drivers influencing the AUD/USD currency pair for the coming years.
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### Current State of AUD/USD
As of June 2024, the AUD/USD pair has traded in a range between 0.66 and 0.67, with volatility tied to economic data releases, central bank decisions, and global risk sentiment. In recent quarters, the Australian dollar has faced challenges from a relatively strong US dollar, US Federal Reserve policy tightening, and mixed economic growth data from Australia. Commodity prices have also fluctuated, especially given uncertainties surrounding demand from China, Australia’s largest trading partner.
Despite these immediate headwinds, UBS’s analysis suggests that the medium- to long-term outlook for the Aussie dollar is more positive than market consensus might indicate.
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### Key Drivers Behind UBS’s AUD/USD Bullish View
UBS’s scenario for the AUD/USD rally is underpinned by several interrelated macroeconomic and financial market dynamics. The following factors are central to their forecast:
#### 1. Decelerating US Dollar Strength
– UBS sees signs that the US dollar’s multi-year strength is peaking.
– Expectations of an eventual shift in US Federal Reserve policy—potentially cutting rates in 2024 or 2025 as inflation cools—support a softening greenback.
– A weaker US dollar typically underpins higher commodity-linked and risk-sensitive currencies like the AUD.
#### 2. Improving Chinese Economic Activity
– Australia’s economic fortunes are closely tied to China, its largest export market for key commodities such as iron ore, coal, and natural gas.
– UBS anticipates a stabilization and gradual improvement in Chinese economic growth after recent policy stimulus and structural reforms.
– Stronger Chinese demand for raw materials directly benefits the Australian trade balance, bolstering the AUD.
#### 3. RBA Monetary Policy Outlook
– The Reserve Bank of Australia (RBA) has shown restraint relative to other central banks in raising rates, but UBS expects the gap between Australian and US policy rates to narrow over the next few years.
– As the US Federal Reserve eventually pivots to rate cuts while the RBA holds rates higher to contain inflation, interest rate differentials could support the AUD.
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