The Australian economy is bracing for a potentially significant announcement as the Gross Domestic Product (GDP) figures for the last quarter of 2024 are set to be released early on Wednesday. Analysts predict a modest annualized growth rate of 1.2%, with the quarterly growth rate expected to be 0.5%. These figures, although modest, are pivotal for the trajectory of the Australian Dollar (AUD) as it struggles against its American counterpart.
The Reserve Bank of Australia (RBA) has adopted a cautious stance towards interest rate adjustments, currently holding the Official Cash Rate at 4.1%, a decrease of 25 basis points from the previous 4.35%. This caution reflects broader concerns about inflation and economic stability. The GDP data's release could influence the AUD's performance, particularly if the figures surpass expectations.
The National Australian Bank (NAB) aligns with these forecasts, anticipating a GDP print of 0.5% QoQ and 1.2% YoY. NAB also predicts that the second half of 2024 will mark the low point in growth for the cycle, with expectations for strengthening economic growth in 2025.
“We continue to expect GDP growth to strengthen over 2025 making H2 2024 the low point in growth for the cycle.” – NAB
The Australian Dollar has recently traded just above the 0.6200 mark, grappling with USD strength and global risk aversion. Factors such as US tariffs have added pressure, limiting gains beyond the 0.6250 zone. However, a strong GDP report could propel the AUD towards the 0.6300 threshold.
“The AUD/USD pair trades just above the 0.6200 mark ahead of the announcement, trapped between USD broad weakness and risk aversion. The daily chart suggests bears retain control, albeit slides towards the 0.6200 figure are attracting buyers. The intraday low following Trump’s levies was set at 0.6201. The latter could give up on a discouraging GDP outcome and result in a slide towards the 0.6100-0.6130 region, as the dismal mood will add to the bearish case.” – Valeria Bednarik, Chief Analyst at FXStreet
Westpac Banking Corporation has revised its forecast upwards, now expecting a 0.7% growth in Q4, an improvement from an earlier estimate of 0.4%. This adjustment follows recent positive partial activity indicators and a surprising boost from business inventories.
“We have upgraded our forecast of economic growth following the latest batch of partial activity indicators in the run-up to Q4 GDP, due tomorrow. We now expect the economy grew by 0.7% in Q4, up from our initial estimate of 0.4% in our preview last week. The upside surprise on business inventories was met with a lower-than-anticipated growth in imports, albeit with some of the latter pointing to slightly softer domestic demand.” – Westpac Banking Corporation
Despite these optimistic adjustments, caution remains prevalent among RBA members regarding further policy easing due to potential inflationary impacts and economic uncertainties.
“As a result, members expressed caution about the prospect of further policy easing, which could also be seen in the forecast for inflation based on the market path,” – RBA Minutes
Valeria Bednarik from FXStreet highlights that stronger-than-expected GDP growth could drive the AUD/USD pair past recent highs and potentially breach resistance levels at 0.6300, 0.6330, and even 0.6370.
“Stronger-than-anticipated Australian growth could help AUD/USD run past 0.6253, the weekly high, and reach the 0.6300 threshold. Beyond the latter, resistance comes at 0.6330 and 0.6370.” – Valeria Bednarik, Chief Analyst at FXStreet
The Australian economy's performance in Q4 and its impact on the AUD will likely hinge on several factors, including domestic demand and international trade dynamics. With global economic tensions influencing market sentiment, any deviation from expected GDP figures could substantially affect both investor confidence and currency value.