Will Australia's Q4 GDP data provide support for struggling AUD/USD?

AUD/USD records worst weekly performance since November

The AUD/USD finished lower last week at 0.6209 (-2.32%), recording its worst week since November 2023 and wiping out gains from the previous three weeks.

The sell-off in the AUD/USD started last Monday as a knock-on effect from Friday night's soft University of Michigan Consumer reading, compounded by reports of a new coronavirus found in bats in China.

Global concerns pressure risk-sensitive Australian dollar

Although the virus headlines quickly subsided, the growth-sensitive AUD/USD encountered further headwinds from a series of poor US economic data, including a drop in the CB Consumer Confidence Index, a rise in jobless claims, and an unexpected decline in Personal Consumption Expenditures (PCE), all heightening slowdown concerns.

Tariff uncertainty also contributed to last week's risk aversion, affecting risk assets, including the AUD/USD. On Thursday, President Trump announced that the 25% tariffs on Mexico and Canada would be postponed to 2 April, having been previously delayed from the original 1 February start date. However, by Friday morning, reports indicated that the tariffs would take effect on 4 March, along with an additional 10% tariff on Chinese imports.

Despite the new tariff on China, the overall tariff rate remains below the pre-election threat of 60%, providing relief to Chinese markets and easing trade war fears ahead of this week's National People's Congress meeting. The meeting is expected to reaffirm a growth target of 5% and announce a modest fiscal expansion from 3% to 4% to support near-term activity.

Locally, the focus for the AUD/USD will be Wednesday's Q4 GDP, previewed below.

AU Q4 GDP

Date: Wednesday, 5 March at 11:30am (AEDT)

Australian GDP increased by 0.3% in the September quarter of 2024 for an annual rate of 0.8%.

The primary drivers of GDP growth were government spending and public capital investment. Per capita GDP growth decreased by 0.3% quarter-on-quarter, marking the seventh straight quarterly decline and the longest recorded stretch of negative growth, deepening the "per capita recession."

In the Reserve Bank of Australia's (RBA) February Statement of Monetary Policy, released alongside its decision to lower the cash rate, GDP forecasts for the Australian economy were revised downward.

December 2024 GDP was lowered to 1.1% from 1.5%, followed by forecasts showing it to rise to 2.4% by December 2025, driven by lower interest rates, increased household consumption, and strong public spending.

As we wait to receive the final partial components that feed into Wednesday's GDP print, the preliminary forecast is for a rise of 0.4% quarter-on-quarter (QoQ), lifting the annual growth rate to 1.2%.

Ahead of the data, the Australian interest rate market is pricing in a full 25 basis point (bp) RBA rate cut by July and a total of 54 bp of RBA rate cuts for the remainder of 2025.

Australian annual GDP growth rate chart

AUD/USD technical analysis

After hitting a low of 0.6087 on the first trading day of February, the AUD/USD undertook a 5.25% corrective rally to the recent 0.6408 high before turning lower again to last week's 0.6192 low.

Whether the AUD/USD's correction is complete at the 0.6408 high and the downtrend has resumed is unclear. It is possible we have only seen the first two waves and the AUD/USD is missing another leg higher towards 0.6500 to complete the corrective sequence.

Nonetheless, provided the AUD/USD remains below the 200-day moving average at 0.6542, bounces will be viewed as corrective, and the risks in the AUD/USD are to the downside.

AUD/USD daily chart

• _{Source: TradingView. The figures stated are as of 3 March 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}