FX.co ★ Australian Dollar Firms Despite Soft GDP

The Australian dollar steadied at approximately $0.647 on Wednesday after experiencing a decline of over 0.5% in the prior trading session. This stabilization was attributed to the interplay between a weaker US dollar and lackluster domestic GDP figures. The US dollar's decline came ahead of the anticipated May jobs report, which could influence the Federal Reserve's upcoming policy decisions amidst continuing concerns about tariffs. Australia’s GDP for the first quarter grew by only 0.2%, falling short of expectations and past performance, strengthening the likelihood of further interest rate reductions by the Reserve Bank of Australia (RBA). The RBA, which has already reduced interest rates twice this year and even contemplated a more substantial rate cut in May, is expected to revise its economic forecast downward. Current market sentiment places an 80% probability on an additional rate cut in July. Despite the disappointing GDP figures, investor sentiment was buoyed by relief that the situation was not worse, supporting the Australian dollar at its present level. Markets found further reassurance in Australia's ongoing expansion in the composite and services sectors, together with a marginal uptick in manufacturing, even amid persistent weaknesses.