Westpac sees AUD capped as Hormuz uncertainty limits upside despite ceasefire
Summary:
- Westpac sees AUD capped at 0.7100–0.7150 near term
- Break higher requires confirmation of de-escalation
- Focus on Strait of Hormuz fully reopening
- Ceasefire seen as uncertain, not yet durable
- Contradictory narratives weighing on sentiment
- Technical limits on shipping still in place
- AUD trading around 0.7035
- Risk-sensitive currency tied to geopolitics
- Upside limited without sustained stability
The Australian dollar is likely to face near-term upside limits unless there is clearer evidence of sustained geopolitical de-escalation, according to Westpac.
Richard Franulovich, the bank’s head of FX strategy, said the AUD is expected to encounter resistance in the $0.7100–$0.7150 range over the next one to two weeks, with a break higher requiring confirmation that current risks have meaningfully eased.
He pointed specifically to the Strait of Hormuz, arguing that markets need to see the waterway “genuinely and fully open” before pricing in a more durable recovery in risk-sensitive currencies such as the AUD. Despite the announcement of a two-week ceasefire between the United States and Iran, uncertainty remains elevated, with conflicting reports on shipping access and continued references to technical constraints around transit.
Franulovich also cautioned that markets need greater confidence that the ceasefire will evolve into a lasting agreement rather than another episode of short-term brinkmanship. Without that, he suggested, the Australian dollar is unlikely to sustain a move materially higher.
The currency was last trading around $0.7035, marginally lower on the session, reflecting a degree of caution as investors weigh headline de-escalation against persistent risks to global energy supply and trade routes.
The AUD’s sensitivity to global growth and commodity dynamics makes it particularly exposed to developments in the Middle East. Ongoing disruption in Hormuz, combined with elevated oil prices and uncertainty around shipping flows, continues to cloud the outlook, limiting upside despite intermittent improvements in sentiment.
