The Australian Dollar (AUD) made gains against the US Dollar (USD) on Wednesday, despite the USD facing continued pressure amid growing concerns over a slowing US economy and the impact of tariffs.
Economic data from Australia bolstered the AUD’s strength. Australia’s Gross Domestic Product (GDP) grew by 0.6% quarter-over-quarter in Q4 2024, surpassing the 0.5% market expectation and the previous quarter’s growth of 0.3%. On an annual basis, the economy expanded by 1.3%, up from 0.8% in Q3 2024.
However, the Judo Bank Composite Purchasing Managers’ Index (PMI) showed a slight decline to 50.6 in February from 51.1 in January, indicating slower but continued growth in business activity for the fifth consecutive month. Similarly, the Services PMI eased to 50.8 from 51.2, reflecting the 13th straight month of expansion, albeit at a more moderate pace. On a positive note, China’s Services PMI rose unexpectedly to 51.4, exceeding expectations of 50.8.
Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser voiced concerns over global trade uncertainty, warning that the tariffs imposed by US President Donald Trump could cause businesses and households to delay investment, which might hurt economic growth.
The US Dollar Index (DXY), tracking the USD against six major currencies, stood at 105.70, supported by rising US Treasury yields. However, the USD remains under pressure as markets speculate that President Trump may backtrack on tariff policies. US Commerce Secretary Howard Lutnick suggested that Trump might reconsider his tariff strategy within days, particularly regarding goods from Canada, Mexico, and China.
Meanwhile, US economic data showed mixed results. The US ISM Manufacturing PMI for February came in at 50.3, below expectations, signaling a slight contraction. In contrast, S&P Global’s Manufacturing PMI for February exceeded expectations at 52.7. US military aid to Ukraine was also paused, adding to the uncertainty in the global landscape.
In China, authorities set an economic growth target of 5% for 2025 and proposed a proactive fiscal policy to stabilize key markets, including real estate and stocks.
The Australian Dollar traded near 0.6260 on Wednesday. Technical analysis suggests that while the pair is below the nine-day Exponential Moving Average (EMA), indicating weakening momentum, immediate resistance lies at the 0.6271 level, aligning with the trend line. Should the pair break the four-week low of 0.6187, it could extend losses towards 0.6087, marking the lowest level since February 2020.
Related Topics:
