China’s economy grew by 4.8% annually in the third quarter of 2025, down from 5.2% in the second quarter. Compared to the previous quarter, the GDP increased by 1.1%, exceeding the expected 0.8%. In June, retail sales climbed by 3.0% annually, and industrial production jumped by 6.5%, both beating forecasts. However, fixed asset investment saw a decline of 0.5% year-to-date in September. The Australian Dollar (AUD) saw a small uptick after the release of China’s GDP data, with AUD/USD rising by 0.24% to reach 0.6511.

Projected GDP Growth For Q3

The National Bureau of Statistics of China projects a GDP growth of 0.8% for Q3, down from 1.1% in Q2. Retail sales and industrial production are estimated to grow by 2.9% and 5.0% year-over-year, respectively. AUD/USD dipped slightly in anticipation of the GDP release and amid the ongoing US federal government shutdown. A stronger-than-expected GDP result could boost the AUD, but there are still risks to consider. GDP measures economic growth over time and plays a significant role in determining currency strength and inflation. A higher GDP typically leads to a stronger currency, attracting foreign investment and affecting interest rates and gold prices. The economic data from China released on October 20, 2025, offers a mixed but optimistic outlook. Despite the annual GDP growth slowing to 4.8%, the quarterly growth and industrial production figures have exceeded expectations. This indicates that China’s economic engine is performing better than anticipated, which could support risk assets in the near future.

Implications For The Australian Dollar

The robust industrial output, which increased by 6.5%, is a key factor likely driven by exports in green energy and electric vehicles. Strong industrial activity supports commodity prices, with iron ore—an important Australian export—remaining steady above $115 a tonne through October 2025. This situation is generally positive for the Australian dollar. However, the 0.5% drop in fixed asset investment highlights ongoing challenges in the property sector. This decline continues a trend that began with a 9.6% drop in property investment back in 2023. The persistent weakness means any potential rebound based on this data could be fragile and vulnerable to negative developments in real estate. For derivative traders, the outlook favors a bullish stance on the Australian dollar, especially against a weakening US dollar. The AUD/USD pair is currently at 0.6511, benefiting from positive surprises in Chinese data and the third week of the US government shutdown. We anticipate upward movement towards the 0.6560 level seen in September 2025. Given the risks in the property market, we should consider defined-risk strategies rather than outright long positions. Buying AUD/USD call options or using bull call spreads would allow us to capitalize on potential gains while limiting our losses. This approach is sensible, especially since the pair has struggled to breach the 0.6400-0.6600 range for much of the past two years. The current weakness of the US dollar due to the government shutdown provides a favorable environment for the AUD. Recall the 35-day shutdown from 2018-2019, which created lasting uncertainty and dollar weakness. If the current political deadlock continues, it is likely to pressure the dollar further and boost currencies like the AUD. Create your live VT Markets account and start trading now.

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