AUD/USD Forecast and News

AUD/USD FORECAST 2025

The battle between the Australian Dollar (AUD) and the US Dollar (USD) will be one worth watching in 2025, with central banks stealing the limelight. The Reserve Bank of Australia (RBA) has kept interest rates at record highs whilst most of its overseas counterparts started the loosening process. The US Federal Reserve (Fed), on the other hand, has trimmed the benchmark interest rate by 100 bps through 2024 and aims to slow the pace of cuts in 2025. The central banks’ imbalance aims for record lows in AUD/USD.

MOST INFLUENTIAL POLITICAL EVENTS IN 2025 FOR AUD/USD

Beyond central banks, market players will be attentive to tariffs. The second coming of Donald Trump to the White House anticipates a global Trade War that could fuel inflationary pressures not only in the United States, but also in all major economies.

Given Trump’s personal battle with China, the Australian economy could end up benefiting from fresh commercial interactions with its neighbour giant.

The AUD/USD currency pair, commonly known as the "Aussie", represents how many US dollars (the quote currency) are needed to purchase one Australian dollar (the base currency). Alongside the New Zealand Dollar (NZD) and the Canadian Dollar (CAD), the AUD is considered a commodity currency due to Australia’s significant exports of raw materials such as precious metals, Oil, and agricultural products.

The Reserve Bank of Australia (RBA) has historically maintained higher interest rates compared to other industrialized nations. Combined with the relatively high liquidity of the AUD, this has made the AUD attractive for carry traders looking for higher yields.

Australia’s economy and currency are closely tied to China, its largest trading partner. Any changes in the Chinese economy can significantly impact the AUD. Additionally, the Australian Dollar is often seen as a diversification tool due to its exposure to Asian economies.

The pair AUD/USD also correlates with Gold prices. Gold is widely viewed as a safe haven asset against inflation and it is one of the most traded commodities.

Reserve Bank of Australia (RBA)

The Reserve Bank of Australia (RBA) is Australia's central bank, deriving its functions and powers from the Reserve Bank Act 1959. Its primary duty is to contribute to currency stability, full employment and the economic prosperity and welfare of the Australian people. The RBA achieves this by setting the cash rate to meet a medium-term inflation target of between 2% and 3%, maintaining a strong financial system and efficient payment infrastructure and issuing the nation's banknotes.

Decisions are made by a board of governors at eight meetings a year and ad hoc emergency meetings as required.

The RBA provides banking services to the Australian Government, its agencies and several overseas central banks and official institutions. Additionally, it manages Australia's gold and foreign exchange reserves.

The Federal Reserve (Fed)

The Federal Reserve (Fed) is the central bank of the United States (US) and it has two main targets: to maintain the unemployment rate at its lowest possible levels and to keep inflation around 2%. The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors and the partially appointed Federal Open Market Committee (FOMC). The FOMC organizes eight scheduled meetings in a year to review economic and financial conditions. It also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. The FOMC Minutes, which are released by the Board of Governors of the Federal Reserve weeks after the latest meeting, are a guide to the future US interest-rate policy.

Michele Bullock

Michele Bullock is an Australian economist and the current Governor of the Reserve Bank of Australia. She assumed the role in September 2023 and is the first woman to hold the position. She is the Chair of the Reserve Bank Board, Payments System Board and Council of Financial Regulators. Prior to her current role, Bullock was the Deputy Governor of the RBA.

Jerome Powell

Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. He was sworn in on May 23, 2022, for a second term as Chairman ending May 15, 2026. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.