Australian Dollar holds gains following key economic data release

• The Australian Dollar strengthens as the US Dollar weakens amid rising concerns over slowing US economic growth.
• Australia's Gross Domestic Product grew by 0.6% QoQ in Q4 2024, surpassing market expectations of 0.5%.
• US Commerce Secretary Lutnick indicated that Trump may reconsider his tariff policy less than 48 hours after its implementation.

The Australian Dollar (AUD) extends its gains for the third consecutive session on Wednesday. The AUD/USD pair strengthens as the US Dollar (USD) remains under pressure amid growing concerns over slowing economic growth and the impact of tariffs on the US economy.

The AUD remains resilient following key economic data released on Wednesday. Australia's Gross Domestic Product (GDP) expanded by 0.6% quarter-over-quarter in Q4 2024, surpassing the 0.3% growth recorded in Q3 and exceeding market expectations of 0.5%. On an annual basis, GDP grew by 1.3% in Q4, up from 0.8% in the previous quarter.

The Judo Bank Composite Purchasing Managers' Index (PMI) declined to 50.6 in February from 51.1 in January, marking the fifth consecutive month of growth in business activity, albeit at a slower pace. The Services PMI also eased to 50.8 from 51.2, reflecting continued expansion for the thirteenth straight month, though at a moderated rate.

Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser highlighted that global trade uncertainty is at a 50-year high. Hauser warned that uncertainty stemming from US President Donald Trump's tariffs could prompt businesses and households to delay planning and investment, potentially weighing on economic growth.

Australian Dollar extends gains as US Dollar continues to lose ground

• The US Dollar Index (DXY), which measures the USD against six major currencies, trades around 105.60 at the time of writing. The Greenback faces downward pressure as markets bet that President Trump will find a reason to walk back his tariff threats.
• US Commerce Secretary Howard Lutnick stated in a televised interview on Fox News that President Trump may reconsider his tariff policy less than 48 hours after its implementation. Lutnick indicated that if the USMCA rules are followed, Trump is considering offering relief.
• President Trump's 25% tariffs on goods from Canada and Mexico took effect on Tuesday, alongside a doubling of duties on Chinese imports to 20%.
• US ISM Manufacturing PMI came in at 50.3, slightly below the 50.5 forecast and down from January's 50.9. In contrast, S&P Global's final Manufacturing PMI for February surpassed expectations at 52.7, improving from its preliminary reading.
• The US PCE inflation report met expectations, with the monthly headline PCE holding steady at 0.3%. Core PCE rose slightly to 0.3% from December's 0.2%, while the annual headline PCE stood at 2.6%, slightly exceeding projections but unchanged from December's figure. Core PCE eased to 2.6%, down from a revised 2.9% in December.
• According to Bloomberg, citing a defense official, the US has "paused" all current military aid to Ukraine. The official stated that all US military equipment not yet in Ukraine would be halted, including weapons in transit via aircraft and ships, as well as those waiting in transit areas in Poland. The pause was reportedly ordered by President Trump, with Defense Secretary Pete Hegseth directed to implement the decision. On Friday, Tensions escalated between US President Donald Trump and Ukrainian leader Volodymyr Zelenskyy during peace deal negotiations.
• Chinese authorities announced early Wednesday that they are setting a target of approximately 5% economic growth for 2025, with a 2% goal for the Consumer Price Index (CPI). Additionally, China plans to implement a more proactive fiscal policy while ensuring stability in both the real estate and stock markets.
• The RBA's February Meeting Minutes highlighted downside risks to the economy. While the Board acknowledged the labor market's strength as a key reason to maintain rates, it noted that the current tightness was inconsistent with a 2.5% inflation target. Ultimately, the Board saw a stronger case for cutting rates.
• Australia's Retail Sales, a key indicator of consumer spending, increased by 0.3% month-over-month in January, rebounding from a 0.1% decline in December. However, the ANZ-Roy Morgan Australian Consumer Confidence Index dropped to 87.7 from 89.8 in the previous week, when it had reached its highest level since May 2022.
• The S&P Global Australian Manufacturing Purchasing Managers Index (PMI) was revised down to 50.4 in February from an initial estimate of 50.6 but remained above January's 50.2. This marked the second consecutive month of improvement in manufacturing conditions and the strongest growth since February 2023.

Australian Dollar rises above 0.6250; next barrier appears at nine-day EMA

AUD/USD is trading near 0.6260 on Wednesday, with technical analysis of the daily chart indicating the pair remains below the nine-day Exponential Moving Average (EMA), suggesting weakening short-term momentum. Additionally, the 14-day Relative Strength Index (RSI) stays below 50, reinforcing a bearish outlook.

On the downside, the AUD/USD pair could target the four-week low of 0.6187, recorded on March 5. A break below this level may open the door for further declines toward 0.6087, the lowest level since April 2020, recorded on February 3.

Immediate resistance is initially seen at the nine-day EMA of 0.6271, aligning with the trend line. A stronger barrier lies at the 50-day EMA of 0.6303.

AUD/USD: Daily Chart