Will the AUD/USD continue its strong performance? Banks and institutions set new targets for 2026

The Australian dollar has performed well at the start of the new year. As of December 30, the AUD/USD quote is 0.6706, just one step away from the 14-month high of 0.6727 set on December 29. From the beginning of the year to now, this currency pair has appreciated by 8.4%, which is quite a significant increase.

**Optimistic Outlook from Two Well-Known Financial Institutions**

Regarding the future trend of the Australian dollar, market institutions are leaning towards optimism. Deutsche Bank predicts that the AUD/USD is expected to reach a target of 0.69 by Q2 2026, and further rise to 0.71 before the end of the year. The National Australia Bank is even more optimistic, believing that supported by potential rate hikes from the Reserve Bank of Australia, the AUD/USD could surge to 0.71 in Q2 2026, and possibly reach 0.72 in Q3.

**Dual Drivers Behind the Appreciation**

The strong performance of the AUD stems from two factors. First is the divergence in monetary policy — the Federal Reserve has entered a rate-cutting cycle, with market expectations of two more cuts in 2026; meanwhile, the Reserve Bank of Australia is expected to start raising rates in 2026 due to inflation rebound and a hawkish tone shift, with most views anticipating two rate hikes throughout the year. This asynchronous policy stance provides strong support for the AUD.

Second is the bull market in commodities. Recently, key commodities such as gold, silver, and copper have continuously hit new highs. As a resource-exporting country, rising commodity prices are positive for the Australian economy, further strengthening demand for the AUD.

**Key Dates Approaching**

Investors should closely watch the release of Australia’s Q4 CPI data on January 28 and the Reserve Bank of Australia’s interest rate decision on February 3. These two major data points will directly influence market expectations of the RBA’s rate hike pace and determine whether the AUD/USD can maintain its strong upward momentum. Additionally, the interest rate differential advantage of the AUD among G10 currencies is widening, laying a foundation for medium-term strength.