Australian Dollar Strengthens as US Dollar Weakens Ahead of Q3 GDP Release
December 23, 2025 — The Australian Dollar (AUD) gained ground against the US Dollar (USD) on Tuesday, buoyed by fresh insights from the Reserve Bank of Australia’s (RBA) December meeting minutes and a weakening US Dollar ahead of the release of the United States’ third-quarter Gross Domestic Product (GDP) annualized data.
Reserve Bank of Australia Signals Cautious Outlook on Inflation and Policy
Minutes from the RBA’s December monetary policy meeting revealed a shift in sentiment among board members, who expressed growing uncertainty over whether the current monetary policy stance remains sufficiently restrictive. The discussions underscored rising concerns that inflationary pressures in Australia may be more persistent than initially anticipated.
RBA policymakers highlighted the need to monitor upcoming inflation data from major economies (G4 inflation data) before making further policy adjustments. They suggested any potential rate increase might be considered in 2026 but emphasized a cautious approach, assessing inflation trends over a longer horizon.
Reflecting these views, the February 2026 ASX 30-Day Interbank Cash Rate Futures contract was trading at 96.34 as of December 18, which implies a 27% chance of a rate hike to 3.85% at the RBA’s next board meeting.
Adding to the hawkish tone, Australia’s Consumer Inflation Expectations rose to 4.7% in December, up from the previous month’s three-month low of 4.5%, further supporting the case for a steady or tightening stance.
US Dollar Faces Pressure Amid Expectations of Fed Easing and Safe-Haven Demand
Meanwhile, the US Dollar has come under pressure as market sentiment increasingly leans toward continued Federal Reserve easing amid an array of economic signals. The US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, slipped to around 98.20 at the time of reporting.
Investors are awaiting the upcoming US Q3 GDP annualized release, which forecasts a slowdown to 3.2% growth from 3.8% recorded in Q2. This anticipated moderation adds to the broader narrative of easing US economic momentum.
The greenback’s declines were further amplified by ongoing geopolitical tensions between the US and Venezuela. The recent US decision to retain seized oil and ships off Venezuela’s coast has stoked safe-haven demand for precious metals such as gold, which typically trade inversely to the US Dollar.
Federal Reserve officials contributed to this sentiment as well. Board Governor Stephen Miran stated that current conditions do not foresee a near-term recession and acknowledged that further policy easing might be necessary to mitigate risks. His comments suggested diminishing support for large rate increases moving forward.
The CME FedWatch tool currently indicates an 80% probability that the Fed will keep rates unchanged in January, up from 75.6% a week prior, whereas the likelihood of a 25-basis-point cut has declined to 20%.
Federal Reserve Bank of Cleveland President Beth Hammack also noted that current monetary policy "is in a good position to pause" and observe the impact of previous rate cuts into early 2026, reinforcing expectations of a cautious stance.
Technical Outlook: AUD/USD Targets Three-Month Highs
On the technical front, the AUD/USD pair drifted below the 0.6660 mark but maintained an upward momentum on the daily chart. It successfully broke above the nine-day Exponential Moving Average (EMA), signaling strengthening bullish energy.
The 14-day Relative Strength Index (RSI) at 63.34 suggests continued buying interest, with short-term momentum aiming for the three-month peak levels near 0.6685 and then 0.6707, the highest since October 2024. Support resides around 0.6633, close to the lower boundary of an ascending channel. Breaking below this support could expose further decline risks toward the six-month low near 0.6414, last seen in August.
Looking Ahead
Market participants remain attentive to the US GDP annualized data to be released later on Tuesday, as it is expected to provide critical direction for the US Dollar’s near-term trajectory. A stronger-than-expected GDP figure could support the greenback, whereas a disappointing print would likely extend the Australian Dollar’s gains.
About the Author:
Akhtar Faruqui is a Forex analyst based in New Delhi, India, focused on dissecting financial markets and currency trends to provide informed insights to global traders.
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