Australian GDP beats estimate, Aussie edges higher

The Australian dollar has rebounded on Wednesday and is in postive territory. In the European session, AUD/USD is trading at 0.6532, up 0.19%. The Aussie declined 0.52% on Tuesday, ending a streak of five consecutive winning sessions.

Aussie GDP hits fastest pace in nearly two years

Australian GDP grew 1.8% y/y in the second quarter, above the revised 1.4% gain in Q1 and higher than the market estimate of 1.6%. This was the fastest pace of growth since Q3 2023. Quarterly, GDP expanded 0.6%, up from a revised 0.3% in Q1 and above the market estimate of 0.5%. The improvement was driven by stronger household consumption and increased government spending.

The stronger-than-expected GDP reading essentially rules out a rate cut at the September 30 meeting. The Reserve Bank has adopted a cautious stance to policy easing and has cut in February, May and August. The markets expect a hold in September, with a November cut priced in at around 75%. That decision will be largely based on the employment and inflation reports ahead of the November meeting.

The RBA is keeping a close eye on inflation, which jumped to 2.8% in July, up sharply from 1.9% a month earlier. This was the highest level since July 2024, but the RBA won't change policy based on one monthly inflation report. Inflation had been on a downtrend and the 1.9% gain was lower than the RBA's target range of 2-3%. The central bank is also keeping a close eye on the labor market, which has shown signs of gradual easing.

AUD/USD technical

• AUD/USD is testing resistance at 0.6535. The next resistance lines are 0.6546 and 0.6562.
• 0.6508 and 0.6492 are providing support.