Trading The Australian Dollar In 2025: What To Know

Despite its recent economic difficulties, Australia remains one of the largest economies in the Eastern Hemisphere. In the last few years, Australia faced economic headwinds due to high inflation figures that led to high interest rates, causing issues as consumers saw their budgets getting a hit.

Along with the Australian economy, the Australian dollar (AUD) has also struggled in these last couple of years against currencies such as the US dollar and the euro. China’s economic troubles after the pandemic have not helped Australia to recover economically.

In this article, we will review the state of the Australian economy, how the Reserve Bank of Australia (RBA) has reacted so far and the Australian dollar’s trajectory.

Australian Economy Struggles To Grow

In 2024, Australia's economy exhibited modest growth amid global uncertainties and domestic challenges. According to the Australian Bureau of Statistics (ABS), the Gross Domestic Product (GDP) increased by 0.3% in the September quarter, marking the twelfth consecutive quarter of expansion. However, the annual growth rate was 0.8%, the lowest since December 2020.

Throughout the year, quarterly growth remained subdued. The March quarter saw a 0.1% rise, with annual growth at 1.1%. The June quarter reported a 0.2% increase, contributing to a 1.5% growth over the 2023-24 financial year. The September quarter's 0.3% growth was primarily driven by government spending and public capital investment.

In response, the Reserve Bank of Australia (RBA) reduced the official interest rate by 0.25 percentage points in February 2025, aiming to support economic activity amid low inflation and modest growth.

Entering 2025, the Australian economy presented an unusual scenario. Despite historically low unemployment rates—remaining at or below 4% for the majority of the past 39 months—inflation was relatively controlled at 2.4%. The RBA projected GDP growth of only 2% and a slight increase in unemployment to 4.2%. Wage growth slowed more than anticipated, particularly in the public sector, with a December 2024 increase of just 0.7%, bringing annual wage growth to 3.2%, down from 4.2% the previous year.

RBA Cuts Rates To Stimulate Australian Economy

In 2024, the Reserve Bank of Australia (RBA) made several significant interest rate moves in response to evolving economic conditions. The year began with the RBA maintaining the cash rate at 4.35%, a level it had held since November 2023. This decision was influenced by ongoing concerns about inflation, which remained above the target range despite some signs of easing.

As the year progressed, the RBA closely monitored economic indicators, including inflation, employment, and GDP growth. In June 2024, the RBA decided to cut the cash rate by 25 basis points to 4.10%. This move was driven by a combination of factors, including weaker-than-expected economic growth and a gradual decline in inflationary pressures. The RBA aimed to support economic activity and ensure that inflation continued to move towards the target range of 2-3%.

Throughout the year, the RBA emphasized the importance of data dependency in its monetary policy decisions. The central bank highlighted that future rate adjustments would be contingent on incoming economic data and the overall outlook for inflation and growth. In its statements, the RBA acknowledged the mixed nature of economic data, with some indicators showing improvement while others remained subdued.

By December 2024, the RBA decided to leave the cash rate unchanged at 4.10%, citing a cautious approach to monetary policy. The central bank noted that while inflation had fallen substantially since its peak in 2022, it remained above the midpoint of the target range. The RBA expressed confidence that inflationary pressures were declining but emphasized the need for continued vigilance.

The RBA's board announced a 25 basis points interest rate cut after its February meeting, in line with analysts' expectations. This marked the first cut since November 2020. Between May 2022 and November 2023, the RBA raised rates 13 times.

Reserve Bank of Australia Governor Michele Bullock highlighted that although markets anticipate future rate cuts, they are not guaranteed. She reiterated that the RBA's policy decisions will be guided by economic data and cautioned that it is still too soon to declare victory over inflation. Additionally, Bullock pointed out that “tariff threats are unpredictable, would be bad for economic activity.” The RBA’s latest inflation projections suggest that CPI inflation could decline to 2.7% by June and stay at a similar level throughout 2026 and 2027.

Overall, the RBA's interest rate moves in the last year reflected a balanced approach to managing inflation and supporting economic growth. The central bank's decisions were guided by a careful assessment of economic conditions and a commitment to achieving its inflation target in a sustainable manner.

Australian Dollar Shows Signs Of Recovery?

In 2024, the Australian dollar (AUD) faced significant challenges, culminating in its worst annual performance in six years. The currency depreciated by 9.2% against the US dollar (USD), influenced by a robust US currency and global economic uncertainties. The AUD/USD pair experienced a notable decline of over 10% from its September peak of $0.69, reaching lows just below the $0.62 mark.

Several factors contributed to this downward trajectory. The US dollar's strength, bolstered by expectations of tax cuts and economic growth under President Trump's administration, exerted pressure on the Australian dollar. Additionally, Australia's economic ties to China meant that fluctuations in Chinese economic activity directly impacted the Australian currency’s performance.

Despite these challenges, the AUD showed resilience in early 2025. A robust Australian jobs report in February propelled the currency to a high of $0.63, its strongest level since mid-December. This surge was attributed to positive employment data, which bolstered market confidence in Australia's economic outlook.

In general, the Australian dollar faced a turbulent 2024, marked by significant depreciation due to external economic pressures. However, early 2025 has shown signs of recovery, driven by strong domestic economic indicators. While projections remain cautious, the Australian dollar’s performance will likely continue to be influenced by both global economic trends and domestic policy decisions.

Trading The Australian Dollar With Admiral Markets

When you open a live trading account with Admiral Markets, you have the chance to trade the Australian dollar against a variety of other currencies, including currency pairs such as AUD/USD, GBP/AUD, and AUD/JPY. This wide selection allows traders to explore diverse strategies and market opportunities.

Trading currency pairs and CFDs on various asset categories necessitates a thorough understanding of market principles to navigate effectively. Admiral Markets provides extensive support for new traders through educational resources such as e-books, comprehensive guides, and interactive webinars. These tools are designed to equip traders with the knowledge needed to analyze price trends, understand market behaviour, and develop effective trading strategies.

Mastering the use of essential risk management tools, like stop-loss and take-profit orders, is vital. These features help traders manage their exposure and protect their capital during volatile market conditions. By effectively applying these tools, traders can build confidence and maintain control in the dynamic world of trading.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.