Will the Australian dollar rise again in 2026? Divergence among central banks and the arrival of black swan risks

In 2025, the AUD/USD( has cumulatively risen by 7%. Will there be more gains in 2026? The key depends on three hurdles.

Central bank policies are diverging, which is positive for the Australian dollar

The monetary policy directions of the Reserve Bank of Australia and the Federal Reserve will directly impact the AUD exchange rate. As Australian inflation heats up, the RBA’s rate cut cycle has ended, and market expectations for rate hikes in 2026 are beginning to emerge.

Currently, institutional views are mixed: Westpac Bank believes the RBA will hold steady; Commonwealth Bank expects one rate hike; National Australia Bank and Citibank are more hawkish, predicting two hikes in February and May.

On the Fed side, the mainstream market expects two more rate cuts in 2026, but JPMorgan is more conservative, only expecting one cut.

Overall, the RBA is leaning towards a hawkish stance while the Fed is more dovish. This policy divergence provides support for the AUD exchange rate.

Can the economic fundamentals still hold up?

In 2025, Australia’s economy shows resilience, with GDP growth surpassing previous years and unemployment rates remaining stable. The OECD) projects a GDP growth of 2.3% in 2026, higher than in 2025, mainly driven by the recovery in household disposable income.

However, there is a concern: Australia’s economy is highly dependent on commodity exports, with China being its largest trading partner. If China’s economic growth slows unexpectedly, Australian exports will face pressure, and the AUD exchange rate may struggle to remain resilient.

Geopolitical black swans could disrupt the overall picture

The AUD is a typical “risk currency,” benefiting when global risk appetite rises, but easily sold off when risk aversion increases.

In 2026, two major risks need to be watched: first, a resurgence of the US-China trade war; second, escalation of conflicts in the Middle East. If these black swan events occur, risk appetite will decline, and the AUD/USD will face downward pressure.

What target levels do institutional forecasts suggest?

Despite the risks, many institutions remain bullish on the AUD in 2026. JPMorgan forecasts the AUD/USD to reach 0.67 in Q1 and rise to 0.68 by year-end. Deutsche Bank is more optimistic, predicting 0.69 in Q2 and potentially reaching 0.71 by year-end. NAB expects the exchange rate to rise to 0.71 in Q2 and further to 0.72 in Q3.

These forecasts are based on strong Australian economic growth, supportive central bank rate policies, and widening interest rate differentials. However, variables such as trade tensions, a slowdown in China’s economy, or escalating Middle East tensions could disrupt this optimistic outlook.