Australian GDP data set to test AUD/USD resolve as USD loses momentum

The Australian Dollar holds its ground against the US Dollar, hovering near 0.6540 during early Wednesday’s Asia-Pacific trading session. Market sentiment remains cautiously optimistic as expectations for Federal Reserve rate cuts intensify, while investors brace for the crucial Q3 Australian GDP release that could reshape currency dynamics.

Disappointing US Economic Signals Pressure the Greenback

The US Dollar faces headwinds from a series of underwhelming economic readings. The manufacturing sector’s weakness became evident when the ISM Manufacturing Purchasing Managers Index slumped to 48.2 in November—down from 48.7 the previous month and falling short of the anticipated 48.6 figure. This contraction in manufacturing activity has fueled growing conviction among traders that the Fed may continue its easing cycle in December, dampening USD appeal across currency pairs including AUD/USD and influencing broader exchange rates like GBP to AUD conversions.

The combination of soft US economic data and Fed officials’ dovish rhetoric has systematically weakened the Dollar, providing support for commodity-linked currencies such as the Australian Dollar.

Australia’s Q3 GDP: The Pivotal Test Ahead

As trading moves into Wednesday, all eyes turn to Australia’s third-quarter Gross Domestic Product report—the session’s marquee event. Analysts anticipate quarterly growth of 0.7% quarter-on-quarter, which would represent the strongest expansion since late 2022. On an annual basis, the Australian economy is projected to post 2.2% growth, bolstered by the Reserve Bank of Australia’s rate reductions implemented throughout 2024.

Should the actual GDP figures exceed forecasts, the Australian Dollar could experience near-term appreciation against the USD. Conversely, disappointment could limit the Aussie’s upside momentum.

China Factor: A Headwind for the Aussie?

Australia’s economic outlook remains intertwined with its largest trading partner’s performance. Recent data painted a concerning picture: China’s Manufacturing PMI unexpectedly deteriorated to 49.9 in November, sliding from 50.6 previously and missing the consensus estimate of 50.5. Readings below the 50 threshold signal manufacturing contraction, raising concerns about regional demand and commodity export volumes.

This weaker Chinese manufacturing backdrop adds a layer of uncertainty for the Australia Dollar, which typically benefits from robust Asian economic conditions and strong commodity demand.

What Comes Next

The immediate direction of AUD/USD hinges on Wednesday’s GDP release. The technical picture around 0.6540 remains contested, with the Australian unit defending key support levels despite broader USD weakness. Traders monitoring currency correlations across pairs like GBP to AUD will note that commodity-linked currencies face similar headwinds from softening global growth signals, suggesting a broader pattern rather than Australia-specific concerns.