FX.co ★ Aussie Holds Firm Despite Soft GDP Data

The Australian dollar held above $0.71, hovering near a three-week high as markets digested the latest GDP data. The economy grew by just 0.3% in the first quarter, undershooting expectations of 0.5% and slowing from a 0.9% expansion in the previous quarter. The weaker growth reading added to evidence that higher interest rates are dampening demand, providing a key reference point for policymakers ahead of the Reserve Bank’s June 15–16 meeting as they assess whether current policy is restrictive enough to return inflation to target. The central bank has already raised rates three times this year in its effort to curb price pressures. This is unfolding against a backdrop of geopolitical tensions tied to the US–Iran conflict, which have driven up global energy prices and heightened external inflation risks. While markets have largely ruled out another rate increase this month, they remain evenly divided on the prospect of a move in August and are almost fully pricing in a peak policy rate of 4.60% by year-end.