Morgan Stanley
2026 FX Outlook: The Year of Pivots
LIVE20 November 2025USD bearish
Back to CurrenciesBullish
AUD/USD
Yield and commodity tailwinds
MS Forecast Path
Cross-Firm Forecast Comparison
Key Drivers
RBA rate path
Commodity prices
China growth
Yield advantage
Pension fund flows
All Firm Targets (Dec '26)
INGVery Bullish0.7300
DBBullish0.7200
MSBullish0.7100
GSBullish0.7000
MUFGBullish0.7000
BofABullish0.7000
BARCBullish0.6900
JPMBullish0.6800
Key Issues for 2026
1.RBA on hold through 2026 makes AUD top G10 yielder
2.Copper and iron ore price recovery supports terms of trade
3.China stimulus creates upside risk for AUD
4.Pension fund hedging flows provide structural support
5.Credit growth at post-GFC highs signals domestic strength
Risk Scenarios
Bull case0.73-0.75
China major stimulus + copper rally + RBA hawkish hold
Base case0.69-0.71
Steady commodity prices, RBA on hold, gradual USD weakness
Bear case0.60-0.63
China hard landing, commodity collapse, global recession
Analysis Summary
RBA on hold through 2026 keeps AUD as top G10 yielder. Commodity tailwinds from copper and iron ore. China stimulus adds upside risk. AUD/USD to grind higher to 0.71 by year-end.