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The Australian dollar (AUD/USD) ended the session on a downbeat note, retreating 0.62% to close at 0.6442. The pair opened at 0.6482 and managed to briefly touch a high of 0.6488, but it failed to hold onto those gains as broader market factors took their toll.
The currency’s sharp fall came after Australia’s economy grew at the slowest pace since the pandemic in the third quarter, a sign of deeper economic concerns.
With annual growth showing signs of weakness, markets have moved to almost fully price in an interest rate cut of 25 basis points in April 2024, up from 73% before the data release.
The economic slowdown was highlighted by weak private demand and continued pressures on household income, even amid tax cuts.
This has significantly reduced market confidence in the Australian dollar, with traders now expecting a more dovish policy stance from the Reserve Bank of Australia in the coming months.
Despite an early push higher, the currency was unable to sustain its gains, falling back to its session low of 0.6408, which suggests a lack of conviction in the bullish sentiment.
Australia’s economic performance remains under scrutiny, especially with concerns about its trade balance and commodity exports.
Broader global headwinds, including concerns about China’s economic slowdown and the ongoing instability in the Middle East and the Black Sea, are weighing on sentiment towards risk-sensitive currencies like the Australian dollar.
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Technical indicators also point to continued uncertainty. The 0.6442 closing price sits just above recent support levels, but if the Australian dollar fails to reclaim 0.6480 in the short term, further downside risks towards the 0.6400 level could emerge.
The U.S. dollar index (USDX) added 0.09% to 106.42, continuing its recovery from recent lows. Traders will closely monitor Friday’s key payrolls data, which could offer fresh clues on the Fed’s next moves and whether the dollar will continue its upward momentum into the year-end.
Market participants are likely to stay cautious as they await further economic data from both Australia and key trading partners.
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