The Australian Dollar (AUD) gained traction against the US Dollar (USD), with the AUD/USD pair trading near 0.6900 during early European hours on Friday [1]. This movement is supported by a hawkish tone from the Reserve Bank of Australia (RBA), which has led to market expectations of another potential rate hike in May, driven by rising oil prices and a tight labor market [1]. Westpac analysts forecast that the RBA could deliver three further rate hikes in 2026, potentially raising the cash rate to 4.85%, a level not seen since November 2008 [1].
Trading volumes are expected to be thin due to the Good Friday holiday, and market participants are closely watching the upcoming US March jobs report, with Nonfarm Payrolls (NFP) anticipated to show an increase of 60,000 jobs and the Unemployment Rate forecasted to remain steady at 4.4% [1].
Geopolitical tensions are also influencing market sentiment. The effective closure of the Strait of Hormuz amid escalating conflict in the Middle East could prompt traders to seek safe-haven assets such as the US Dollar [1]. US President Donald Trump has pressured Iran "to make a deal" following a military strike that destroyed a bridge near Tehran [1]. Iran’s foreign minister Abbas Araghchi responded that Washington’s strikes on civilian infrastructure will not force the country to back down, stating such actions "convey the defeat and moral collapse of an enemy in disarray" [1].
The Australian Dollar's performance is closely tied to RBA policy decisions, commodity prices, and global risk sentiment. The hawkish outlook from the RBA and expectations for further rate hikes are currently supporting the AUD, but ongoing geopolitical risks and the US jobs report could influence near-term direction [1].
CONCLUSION
The Australian Dollar is benefiting from a hawkish RBA stance and expectations of further rate hikes, but geopolitical tensions and the upcoming US jobs report are key factors to watch. Market sentiment remains cautious, with potential for volatility depending on developments in the Middle East and US employment data. Overall, the AUD is supported in the short term, but risks persist.