Australian GDP Spotlight: AUD/USD Awaits Wednesday's Economic Test Near 0.6540

The AUD/USD exchange rate remains anchored near 0.6540 as market participants brace for Australia’s third-quarter GDP release on Wednesday. The pair’s sideways movement reflects competing forces—softer US economic indicators on one side and the anticipation of crucial domestic data on the other.

Greenback Pressure from Disappointing US Data

Recent weakness in American economic indicators has fueled expectations for Federal Reserve rate cuts in December, pressuring the US Dollar across major pairs, including AUD/USD and EUR/USD. The US Manufacturing Purchasing Managers Index (PMI) delivered a particularly soft reading, contracting to 48.2 in November from 48.7 the previous month, falling short of the consensus forecast of 48.6. Such readings below 50 signal manufacturing sector contraction, a concern that has redirected capital away from the safe-haven dollar.

This deterioration in US data has shifted the rate-cut narrative, with traders increasingly pricing in easier monetary policy from the Fed. The resulting dollar weakness has created tailwinds for commodity-linked currencies like the Australian Dollar, though upward momentum remains constrained ahead of key events.

Australia’s GDP Report: The Critical Juncture

Wednesday’s Australian Gross Domestic Product data for Q3 represents the pivotal event for AUD/USD direction. Economists anticipate quarterly growth of 0.7% QoQ—the strongest expansion since late 2022—with annual growth projected at 2.2%, underpinned by the Reserve Bank of Australia’s earlier easing cycle.

Should the economy deliver better-than-expected growth numbers, the Australian Dollar could gain meaningful support against the USD in the near term. Conversely, a disappointment could limit upside potential for the Aussie.

China’s Economic Slowdown Adds Complexity

Headwinds are also emerging from Australia’s largest trading partner. China’s Manufacturing PMI unexpectedly dipped to 49.9 in November, down from 50.6 previously, undershooting the 50.5 consensus estimate. This contraction—the first below the 50-point threshold separating expansion from contraction—raises concerns about slowing Chinese demand, which could indirectly weigh on the Australian Dollar through reduced export prospects.

The divergence between US rate-cut expectations and potential Chinese economic softness creates a mixed backdrop for AUD/USD and other risk-sensitive currencies like EUR/USD in the weeks ahead.

What’s Next for Traders

With the Australian GDP report pending, volatility could pick up around the 0.6540 handle. A strong result may propel the pair higher, while a soft print could trigger a test of lower support levels. Until then, the pair’s range-bound behavior reflects the market’s hesitation to make bold directional calls.