Australian Dollar remains stronger following stronger China data

• China's Q3 GDP grew 4.5% year-over-year, topping market expectations of 4.4%.
• September Retail Sales and Industrial Production in China both expanded faster than forecasted.
• CME FedWatch Tool suggests that traders price in nearly an 84% chance the Fed keeps rates unchanged this month.

AUD/USD extends its gains for the second successive day, trading around 0.6970 during Asian hours on Monday. The pair remains stronger as the Australian Dollar (AUD) holds ground following the release of key economic data from China, Australia’s close trading partners.

China’s economy expanded at a faster pace than expected in the third quarter, with Gross Domestic Product (GDP) growing by 4.5% year-over-year. This represents an acceleration from the 4.3% growth recorded in the second quarter and beat the market consensus forecast of 4.4%. On a quarter-over-quarter basis, the Chinese economy expanded by 1.2% in Q3, picking up momentum from 0.9% in Q2 and exceeding expectations of 1.1%.

The stronger-than-expected economic performance was further supported by robust activity data for September. Chinese Retail Sales increased by 1.1% year-over-year, significantly outperforming the 0.5% growth expected by analysts and accelerating from 0.4% in August. Industrial production also gained momentum, climbing 5.5% year-over-year in September compared to a 5.4% forecast and 5.2% in the previous month.

The AUD/USD pair gains ground as the US Dollar (USD) struggles under fading expectations for a Federal Reserve (Fed) rate hike in October. Market sentiment shifted after Fed Chairman Kevin Warsh spoke at an International Monetary Fund event on Friday, stating that he does not prejudge interest-rate decisions and offering no clear indication of whether the central bank will raise or hold short-term rates at its upcoming October 27–28 meeting.

Market expectations for a rate increase have dropped significantly. According to the CME FedWatch Tool, traders are now pricing in nearly an 83.9% probability that the Fed will keep interest rates unchanged later this month, a sharp rise from the 49% chance priced in just a month earlier.