Australian Dollar Gains as China’s Q2 GDP Surprises, US Dollar Softens Ahead of CPI

Australian Dollar Gains as China’s Q2 GDP Surprises, US Dollar Softens Ahead of CPI

The Australian Dollar (AUD) continued its upward momentum against the US Dollar (USD) in Tuesday’s trading, bolstered by better-than-expected Chinese economic data. The AUD/USD pair hovered near session highs as market sentiment improved following the release of China’s Q2 GDP figures.

China’s Economy Supports the Aussie

China, Australia's largest trading partner, reported a 5.2% year-over-year GDP growth in Q2, beating expectations of 5.1% though slightly down from Q1’s 5.4%. On a quarterly basis, GDP rose 1.1%, outperforming the 0.9% forecast.

Other key economic indicators:

• Retail Sales: Rose 4.8% YoY in June (vs 5.6% expected)
• Industrial Production: Surged 6.8% YoY, exceeding the 5.6% estimate

The National Bureau of Statistics (NBS) emphasized a stable first-half performance while calling for structural reforms and a more robust investment environment. It noted that the real estate sector is beginning to stabilize—crucial for broader Chinese economic health.

Caution as Geopolitical Risks Rise

While the Aussie gains ground, traders remain cautious. The US Dollar Index (DXY) has weakened slightly ahead of the upcoming US Consumer Price Index (CPI) release, expected later today. This CPI data will influence Federal Reserve rate expectations.

Meanwhile, US President Donald Trump has introduced renewed geopolitical uncertainty by threatening "very severe" tariffs on Russia unless a peace agreement is reached within 50 days. Additionally, Trump warned of secondary sanctions on nations importing Russian oil—potentially straining global trade relations and pushing safe-haven flows back into the USD.

Market Outlook: Will the AUD Hold Gains?

With global investors watching both macroeconomic fundamentals and geopolitical developments, the AUD/USD pair may remain volatile. If the US CPI prints above expectations and geopolitical tensions intensify, the Greenback could rebound, limiting further AUD gains.

Explore More on Tredu.com:

• What China’s GDP Means for Commodity Currencies
• US CPI Preview: Inflation Risks and Fed’s Dilemma
• Trump’s Tariff Timeline: What Markets Should Expect Next