Synopsis:

ANZ projects a rise in the AUD/CAD exchange rate, driven by robust Australian CPI data and improved risk sentiments. The bank anticipates that the Reserve Bank of Australia (RBA) will maintain its current policy stance until at least November, further supporting the Australian dollar's strength against the Canadian dollar and other major currencies.

Key Points:

• Australian CPI Data: The recent CPI print from Australia showed significant strength in non-tradable and services inflation, particularly in the health and education sectors. This robust inflationary pressure supports the view that the RBA will not alter its policy rate until November, providing a stable backdrop for the AUD.

• AUD/USD Outlook: Strengthened by the Q1 CPI data and a favorable risk environment, the AUD/USD pair is well-supported heading into the next week. A convincing breach of its 200-day moving average at 0.6527 could pave the way for further gains, potentially testing higher resistance levels at 0.6588 and 0.6650.

• AUD/CAD Dynamics: With Canadian inflation showing signs of easing and risk sentiment improving, ANZ sees a potential for higher AUD/CAD rates. The pair has previously overstretched beyond 0.90, yet changes in the economic landscape could push it towards 0.95 under favorable conditions.

• Comparative Inflationary Pressures: The AUD is expected to perform stronger on G10 crosses, particularly against currencies like the CAD, NZD, and JPY, where inflationary pressures are more evidently subsiding.

Conclusion:

ANZ's analysis indicates a bullish outlook for the AUD, especially against the CAD, driven by persistent inflationary pressures in Australia contrasted with easing inflation in Canada. The anticipated stability in Australian monetary policy, coupled with favorable global risk sentiments, may enhance the AUD's position in the forex markets.