AUD/USD Q4 Outlook: Balanced Rate Backdrop Takes Shape

The Australian dollar's fourth-quarter outlook is shifting as monetary policy regains control of the macro narrative. The RBA and Fed are expected to continue hiking rates, with the Aussie facing a more balanced rate backdrop than in Q3.

Australia's economy continues to lose momentum, but inflation remains the greater headache for the RBA. Trimmed mean inflation stands at 3.6% year-on-year, and markets expect at least one further RBA hike this quarter.

The Fed has already resumed tightening, with its own projections pointing to one more hike in Q4. However, market pricing has turned more hawkish, implying a risk of two further hikes before year-end.