AUD/USD traded near 0.6900 in early European trading on Friday, with support from a hawkish Reserve Bank of Australia stance. Trading volume may be lower due to the Good Friday holiday.
Westpac expects the RBA to raise the cash rate by 25 basis points in May, June and August 2026. This path would take the cash rate to 4.85%, last seen in November 2008.
Rba Outlook And Near Term Focus
Markets are watching the May RBA meeting, with expectations leaning towards another possible rate rise amid higher oil prices and a tight labour market. Attention also turns to the US March jobs report due later on Friday.
Middle East tensions, including the effective closure of the Strait of Hormuz, have raised demand for safe-haven currencies such as the US Dollar. A US military strike destroyed a bridge near Tehran, and US President Donald Trump urged Iran to “make a deal”.
Iran’s foreign minister Abbas Araghchi said recent US strikes on civilian infrastructure would not change Iran’s stance. He described the actions as showing “the defeat and moral collapse of an enemy in disarray”.
US Nonfarm Payrolls for March are forecast to rise by 60,000. The Unemployment Rate is expected to remain at 4.4%.
Trading Implications And Strategy
We are seeing a clear tug-of-war in the AUD/USD, with a hawkish Reserve Bank of Australia putting a floor under the Aussie dollar. The expectation for three more rate hikes this year is a significant tailwind for the currency. This is underpinned by sticky inflation, which data from Q1 2026 showed was running at 3.8%, still well above the RBA’s target band.
Traders should prepare for potential weakness in the US dollar following today’s employment report. The forecast of only 60,000 new jobs is a sharp drop from the healthier numbers we saw through much of 2025, which often averaged over 150,000. A soft number could reinforce the view that the US economy is slowing, which would likely push AUD/USD higher.
However, the escalating conflict in the Middle East is a major wildcard that cannot be ignored. The closure of the Strait of Hormuz is a serious threat, as historically about 20% of the world’s total oil consumption passes through it daily. This risk of a supply shock could send traders rushing into the safety of the US dollar, overriding any weakness from domestic data.
Given these opposing forces, a simple directional bet is highly risky in the coming weeks. We believe the best approach is to trade the volatility itself through options. Buying straddles or strangles on the AUD/USD could be profitable if we get a large price swing, regardless of whether it’s the RBA or geopolitical fears that ultimately win out.
