Goldman Raises AUD/USD Target to 0.75 After RBA’s Hawkish Pivot
Goldman Sachs has upgraded its year-end 2025 AUD/USD forecast to 0.75 from 0.68 following a clear hawkish shift by the Reserve Bank of Australia (RBA). The bank cites widening interest rate differentials, persistent inflation, a tight labour market (unemployment ~3.8%), faster wage growth (WPI ~4.2% y/y), and resilient commodity prices—particularly iron ore and critical minerals—as drivers. The RBA held its cash rate at 4.60% in March 2025 but removed easing guidance and signalled readiness to hike if inflation does not return to the 2–3% target. Market reaction included increased AUD/USD volatility and a stronger medium-term bullish narrative for the Australian dollar. Analysts note implications for carry trades, potential capital inflows into AUD assets, and spillovers to currencies with more dovish central banks (e.g., JPY, CHF). Key risks include a sharper slowdown in China, US dollar appreciation from Fed policy surprise, or a fall in commodity prices. Traders should watch RBA statements, Australian inflation and payrolls, China demand, iron ore and lithium prices, and US data that could alter the relative policy outlook.
Bullish
Goldman Sachs’ upgrade to 0.75 is driven by a clear policy divergence: the RBA’s hawkish pivot combined with strong domestic data (low unemployment, rising wages) and resilient commodity prices increases the attractiveness of AUD-denominated assets. Historically, similar episodes of higher-for-longer rates in Australia (or other high-yielding economies) have supported AUD appreciation and strengthened carry trade flows. In the short term, expect elevated volatility around data releases and RBA communications as traders repricing yields and risk adjust positions. In the medium to long term, if RBA keeps rates elevated while peers ease or remain dovish, interest rate differentials should sustain AUD strength and draw carry trade interest. Key downside scenarios—sharp China slowdown, a strong USD rally triggered by Fed hawkishness, or commodity price collapses—could reverse the bullish case rapidly. Traders should manage risk via stop levels, monitor cross-asset signals (commodity prices, US data, China indicators), and watch implied volatility and positioning data to time entries and hedges.