- The Australian Dollar trims losses recovering from a five-day low as the US Dollar’s intraday momentum fades.
- US ISM manufacturing PMI signals contraction, with rising prices paid underscoring sticky cost pressures.
- Focus shifts to Wednesday’s Australian data, with Q2 GDP, AiG Industry Index, and S&P Global PMIs set to guide AUD sentiment and RBA outlook.
The Australian Dollar (AUD) trims some of its earlier losses against the US Dollar (USD) on Tuesday, recovering from a five-day low as the Greenback loses momentum after its broad intraday rally. The modest pullback in the AUD/USD pair also reflects trader repositioning ahead of Australia’s Q2 Gross Domestic Product (GDP) release due on Wednesday.
At the time of writing, AUD/USD is trading near 0.6514, down over 0.50% on the day. Meanwhile, the US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is holding steady around 98.30, just shy of the four-day high touched earlier in the American session.
Earlier in the day, US manufacturing Purchasing Managers’ Index (PMI) data reinforced concerns about the health of the factory sector. The Institute of Supply Management (ISM) survey showed overall activity remained in contraction, with production and employment still weak. A rebound in new orders provided some relief, but rising prices paid pointed to persistent input cost pressures, complicating the inflation outlook. The mixed readings capped the US Dollar’s intraday momentum, giving high-beta currencies like the Aussie room to stabilize.
Attention now turns to Australia’s Q2 GDP figures, where economists anticipate a modest rebound in growth. Quarterly GDP is forecast to expand by 0.5% in Q2, up from the 0.2% pace in Q1, while annual growth is projected to accelerate to 1.6% from 1.3% previously. According to a report by Reuters, economists at RBC and Citi have revised their Q2 growth forecasts lower to 0.5%, citing a lack of support from government spending but noting encouraging signs from household demand and private investment.
Alongside GDP, Wednesday’s calendar will also feature the AiG Industry Index for July and the S&P Global Composite and Services PMIs for August, which will provide a broader snapshot of business activity and demand conditions across Australia’s economy.
The upcoming GDP release will be key in shaping expectations for the Reserve Bank of Australia’s (RBA) monetary policy path. With the cash rate at 3.60%, markets are pricing in a further cut in November that could bring borrowing costs closer to 3.35%. A stronger reading may ease immediate pressure on the central bank to act, while a weaker outcome would reinforce market bets on near-term easing.
Economic Indicator
Gross Domestic Product (QoQ)
The Gross Domestic Product (GDP), released by the Australian Bureau of Statistics on a quarterly basis, is a measure of the total value of all goods and services produced in Australia during a given period. The GDP is considered as the main measure of Australian economic activity. The QoQ reading compares economic activity in the reference quarter to the previous quarter. Generally, a rise in this indicator is bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.
The Australian Bureau of Statistics (ABS) releases the Gross Domestic Product (GDP) on a quarterly basis. It is published about 65 days after the quarter ends. The indicator is closely watched, as it paints an important picture for the economy. A strong labor market, rising wages and rising private capital expenditure data are critical for the country’s improved economic performance, which in turn impacts the Reserve Bank of Australia’s (RBA) monetary policy decision and the Australian dollar. Actual figures beating estimates is considered AUD bullish, as it could prompt the RBA to tighten its monetary policy.
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