**AUD/USD Outlook: Australian Dollar Supported by RBA Pause and US Political Risks**
*Based on analysis from Kenny Fisher, ForexCrunch, with additional context and data.*
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The Australian dollar (AUD) has recently shown strength against the US dollar (USD), with notable gains driven by key monetary policy decisions in Australia and ongoing political uncertainty in the United States. This comprehensive outlook examines the contributing factors for the AUD/USD movement, assesses short and long-term forecasts, and explores the broader economic context influencing this leading currency pair.
### RBA Maintains Policy Rate: Signals Confidence in Current Monetary Setting
– The Reserve Bank of Australia (RBA) held its cash rate steady at 4.10 percent during its latest policy meeting.
– This marks the fourth time in the last five meetings that the RBA opted for a pause, signaling confidence in its current monetary policy stance.
– The decision followed a two-year cycle of aggressive tightening, which saw the RBA hike rates by a total of 400 basis points to combat persistent inflation.
#### Key Takeaways from the RBA’s Message
– The RBA board acknowledged that although inflation is above target, it is showing signs of moderating.
– Central bank officials indicated that further tightening is possible should inflationary pressures remain elevated or prove more persistent than anticipated.
– The RBA continues to stress that monetary policy will be adjusted as needed, guided by data and evolving economic trends.
– Markets interpreted the tone as cautiously optimistic, resulting in immediate supportive flows for the Australian dollar.
#### Inflation and Economic Momentum in Australia
– Consumer Price Index (CPI) inflation has eased from peaks but remains above the RBA’s 2–3 percent target range.
– The most recent inflation reading showed a year-over-year print of 5.2 percent, down from earlier highs but still sticky, especially in services sectors.
– Employment markets in Australia remain relatively tight, with the unemployment rate hovering around 3.7 percent.
– Wages growth is steady, though not accelerating, allowing the central bank to monitor inflation without immediate pressure to resume hikes.
### Political Turmoil in the US: Implications for the Greenback
Ongoing political brinkmanship in the United States has begun to weigh on the US dollar and risk sentiment more broadly.
#### US Government Shutdown Fears
At the core of current sentiment is the threat of a government shutdown, with the US Congress failing to promptly pass appropriations bills required to fund federal agencies.
– A shutdown would halt “non-essential” federal government operations, furlough hundreds of thousands of workers, and suspend certain public services.
– Past shutdowns have had negative implications for market sentiment, contributing to risk aversion and volatility in both currency and equity markets.
#### Impact on the US Dollar
– Historically, shutdown fears increase uncertainty and decrease confidence in the US dollar, especially if paired with fears that economic data releases will be delayed or government payments interrupted.
– The dollar often finds support as a safe haven, but
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