AUD/USD: Growth index softens but flows turn supportive – BNY

BNY’s Bob Savage notes that Australia’s Westpac-Melbourne Institute Leading Index has slipped below trend, signaling weaker growth ahead as higher rates and the Middle East energy shock weigh on activity. However, iFlow shows a recent surge in interest in AUD/USD, reflecting a positive mix of a hawkish Reserve Bank of Australia (RBA) stance and favorable terms of trade from the conflict-driven commodity backdrop.

Below-trend growth with supportive flows

"Australia’s Westpac-Melbourne Institute Leading Index six-month annualized growth rate fell to -0.13% in March 2026 from +0.05% in February, marking the first below-trend reading since August 2025."

"The decline from +0.31% in October 2025 reflects weakening economic momentum, driven by rising interest rates and the global energy shock linked to the Middle East conflict."

"The index signals below-trend growth for the remainder of 2026, indicating a slowdown in economic activity relative to trend three to nine months ahead."

"iFlow indicates a recent surge in interest in AUD/USD amid the recovery in risk appetite, underscoring a positive combination of a hawkish RBA along with a positive terms-of-trade shock for Australia due to the conflict."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)