Bank of America Global Research discusses AUD outlook in light of Australia's A$180bn data centre investment pipeline.

"Australia's A$180bn data centre investment pipeline, including around A$100bn over the next three years, is set to drive the largest investment cycle since the mining boom. We expect this to support AUD through a higher-for-longer RBA cash rate and higher commodity prices, particularly copper. But we don't expect a repeat of the mining boom which took AUD to 1.10," BofA notes.

"Our AUD model estimates fair value is currently at 0.7140 vs spot at 0.6960. With BofA's metals team forecasting further gains in copper prices, we see scope for AUD to appreciate towards 0.73 over 2027. That said, upside against USD looks capped with the US undergoing an even larger investment cycle and risks skewed towards further Fed tightening. Instead, we see more opportunities on the crosses. We see upside risks to AUD/NZD ahead of the NZ election and continue recommend long AUD/ZAR (entry: 11.57, target 12.15 and stop 11.22)," BofA adds.