Synopsis:

Credit Agricole maintains a gradual bullish outlook on AUD/USD, supported by expectations of a shallow RBA rate cutting cycle, broad USD weakness, and improving sentiment toward China. While direct US tariffs on Australia are expected to be minor, indirect exposure through China’s vulnerability to US trade actions remains a downside risk. The bank forecasts a slow grind higher, with AUD/USD targets of 0.63 by end-Q2, 0.64 by end-Q3, and 0.66 by year-end.

Key Points:

1️⃣ Shallow RBA Easing Cycle Supportive for AUD 🏦

• The RBA is expected to cut rates modestly, offering some relative yield support.

2️⃣ Broad-Based USD Weakness Adds Tailwinds 💵

• Credit Agricole sees the USD losing ground over time, helping AUD/USD edge higher.

3️⃣ Improved China Sentiment Helps, But Trump Tariff Risk Lingers 🇨🇳

• Stronger investor sentiment toward China is a positive for AUD.

• However, Trump-era tariffs impacting China could weigh on Australian export-linked sentiment, acting as a drag on the pace of AUD gains.

4️⃣ Limited Direct Tariff Exposure for Australia ⚖️

• Australia’s 10% GST unlikely to attract significant reciprocal US tariffs, minimizing direct economic impact.

5️⃣ Forecast Path for AUD/USD 📈

• Q2 2025: 0.63

• Q3 2025: 0.64

• Q4 2025: 0.66

Conclusion:

Credit Agricole expects AUD/USD to rise gradually through 2025, backed by a mild RBA easing cycle, weaker USD, and China optimism, but warns that China’s exposure to US tariffs could cap AUD upside. The pair is forecast to reach 0.66 by year-end, with near-term gains likely to be modest and bumpy.