Australian Dollar continues being punished by investors after weak GDP readings

AUD/USD holds near four-month lows near 0.6400, pressured by disappointing Q3 GDP figures in Australia.
The RBA’s dovish expectations gain traction, with markets now anticipating rate cuts starting in April 2025.
Technical indicators signal persistent bearish momentum with the pair holding near critical support at 0.6400.

Patricio Martín FXStreet

The AUD/USD holds around 0.6435 on Thursday as the Aussie loses interest amid a backdrop of weak Australian fundamentals. Quarterly GDP growth in Australia underwhelmed traders, fueling speculation that the Reserve Bank of Australia (RBA) may commence rate cuts as early as April 2025.

On the US side, the USD is also trading the red, mainly due to soft labor market data ahead of Friday’s Nonfarm Payrolls (NFP) figures from November.

Daily digest market movers: Aussie continues weak dynamic as investors digest GDP data

Australia's Q3 GDP expanded by just 0.3% QoQ, falling short of the 0.4% forecast.
Annual GDP growth slowed to 0.8%, well below the estimated 1%.
The soft GDP print has shifted expectations for RBA rate cuts forward to April 2025, earlier than previous market consensus for May.
On the US side, Federal Reserve Chair Jerome Powell emphasized the central bank's cautious approach to neutral rates amidst signs of economic resilience.
Weekly Initial Jobless Claims surged to 224,000, surpassing both the previous week's figure of 213,000 and forecasts of 215,000.
November Challenger Job Cuts also increased to 57,727, signaling a growing trend in layoffs.
November’s NFPs will be key on Friday as it might trigger a recovery for the pair.

AUD/USD technical outlook: Bears maintain control as bearish momentum lingers

The AUD/USD pair remains entrenched in a bearish trajectory with technical indicators pointing to continued downside potential.

The daily Relative Strength Index (RSI) remains deep in negative territory, nearing the oversold zone, signaling strong selling momentum. The Moving Average Convergence Divergence (MACD) is firmly below the signal line, reinforcing the prevailing bearish bias. The pair is holding near the critical 0.6400 level, a break of which could open the door for further declines. Any recovery attempts may face stiff resistance at 0.6500, with stronger barriers near 0.6550.

RBA FAQs

What is the Reserve Bank of Australia and how does it influence the Australian Dollar?

The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

How does inflation data impact the value of the Australian Dollar?

While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

How does economic data influence the value of the Australian Dollar?

Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

What is Quantitative Easing (QE) and how does it affect the Australian Dollar?

Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

What is Quantitative tightening (QT) and how does it affect the Australian Dollar?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

Author

Patricio Martín

FXStreet

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

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