Australian Dollar Outlook: Will AUD Stay Resilient in 2H 2025?

As we enter the second half of 2025, the Australian Dollar (AUD) is holding firm against major peers. Resilient commodities, recalibrating central bank policy, and signs of a floor in China’s growth story are keeping the currency supported—despite rising global uncertainty and fresh trade war headlines. Here’s what’s driving the momentum and what to watch as macro crosscurrents build.

Australian Dollar 1H 2025 Recap: What Drove the Strength?

Domestically, two well-flagged RBA rate cuts in February and May were absorbed smoothly by the market. With both moves broadly anticipated, and the central bank maintaining a measured tone, confidence in Australia’s macro stability held firm. Key exports like iron ore also lent support—prices hovered above US$100/tonne through the early months, buoyed by Chinese infrastructure demand and lower port inventories.

Onshore sentiment was further underpinned by tentative signs of improvement out of China. While growth remains below trend, property prices in top-tier cities have begun to stabilize after over a year of declines. China’s official manufacturing PMI briefly returned to expansion in February and March before easing again—still offering some encouragement around the floor in activity.

Meanwhile, the U.S. dollar came under renewed pressure as economic momentum faded and policy uncertainty escalated. Q1 GDP contracted by 0.5%—the weakest print in three years—raising fresh doubts around the Fed’s trajectory. Dovish tweaks to its forward guidance only accelerated the rotation out of the greenback.

All up, the combination of resilient commodity demand, a cautiously stabilizing China, and a softer U.S. macro backdrop helped shore up the Australian dollar into the second half.

Australian Dollar 2H 2025 Outlook: Rate Cuts Priced In, But Can AUD Hold?

Markets have largely front-loaded expectations for the RBA’s easing path for the remainder of 2025. As of 2 July, the ASX 30-Day Interbank Futures curve shows implied yields sliding below 3% by early 2026—well off the 3.85% peak earlier this year. With at least three rate cuts effectively priced in, any additional drag on the AUD from rate differentials may be marginal unless the RBA adopts a more aggressive dovish stance.

While the Australian economy showed signs of sluggishness in the first half, it hasn’t yet slipped into territory that raises red alarm. According to the RBA’s May 2025 Statement on Monetary Policy, GDP is tracking in the 1.5–2.0% range—soft by historical standards, but still consistent with a low-growth environment rather than contraction. Inflation remains anchored within the 2–3% target band, offering the RBA flexibility. That said, the labour market is showing early cracks, with unemployment projected to edge higher into 2026, pointing to areas of underlying weakness that warrant monitoring rather than immediate concern (Graph 4.7).

Globally, China remains the wild card. While recent forecasts from the RBA suggest a modest pickup in Chinese growth in 2026, the near-term trajectory remains subdued (Graph 4.1). For AUD, which closely tracks Chinese demand and sentiment, this caps upside.

Adding to the uncertainty, Trump’s escalating tariff threats have rekindled fears of a renewed trade war.

With Australia caught between key partners, renewed trade tensions could amplify volatility and pressure export-sensitive sectors—particularly if China or Japan are targeted.

Australian Dollar Outlook Summary:

With global crosscurrents intensifying, the AUD’s next move will likely be shaped less by domestic data—and more by how geopolitics, China’s demand pulse, and Fed recalibrations unfold in the months ahead.

Australian Dollar Technical View: AUD/USD and AUD/CNH

From a technical perspective, AUD/USD is holding within a rising channel on the weekly chart, with strong support around 0.6490 and resistance near 0.6650. MACD has turned positive while KDJ indicators remain elevated—pointing to bullish momentum. A weekly close above 0.6580 may trigger further upside toward 0.6720.

On the AUD/CNH daily chart, the pair is flirting with key resistance at 4.71 after a strong breakout from an ascending triangle. Short-term momentum is clearly bullish, but overbought signals on KDJ (above 110) suggest caution. A clean break above 4.72 would open the door to retest April’s highs around 4.78.

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