Australian greenback slides to 4-mth low as comfortable GDP fuels charge reduce bets

Investing.com– The Australian greenback weakened sharply on Wednesday after softer-than-expected gross home product information spurred elevated bets that the Reserve Financial institution will reduce rates of interest earlier in 2025. 

The AUD/USD pair slid 1.1% to $0.6411 by 22:30 ET (03:30 GMT). 

Third-quarter GDP grew 0.8% year-on-year, lacking expectations of 1.1% and slowing from the 1% seen within the prior quarter.

Quarter-on-quarter progress picked as much as 0.3% however missed expectations of 0.5%, whereas additionally falling beneath the RBA’s 0.5% forecast. 

The softer studying was pushed mainly by weak non-public spending, as sticky inflation and excessive mortgage charges eroded client urge for food. Tender commodity export costs additionally weighed as abroad demand, particularly in China, remained weak. 

The studying sparked hypothesis that the RBA can be pressured into easing coverage sooner reasonably than later, particularly as GDP missed its forecasts. 

“The discharge of one other quarter of tepid AU GDP has resulted within the Australian rate of interest market pulling ahead a primary 25bp RBA charge reduce into April from Could,” Tony Sycamore, Market Analyst at IG wrote in a social media put up. 

The GDP information undermines latest signaling from RBA members that the central financial institution will preserve rates of interest excessive for longer, particularly amid latest indicators of sticky underlying inflation. 

Client inflation information for October confirmed underlying inflation nonetheless remained comfortably above the RBA’s 2% to three% goal vary, with the financial institution solely forecasting inflation to sustainably fall inside its goal by 2026. 

Whereas the central financial institution has acknowledged that cooling inflation is its prime precedence, softening financial circumstances within the nation might spur early charge cuts.

ANZ and Westpac each anticipate the RBA to start slicing charges by Could 2025 in a gentle easing cycle. 

Capital Economics stated in a Wednesday notice that the financial institution will “begin a brief easing cycle within the second quarter of subsequent 12 months.”