The Australian dollar was little changed around $0.71, consolidating recent losses as investors digested stronger-than-expected GDP data that reinforced expectations for further monetary tightening. The economy grew 0.4% quarter-on-quarter in Q2, exceeding the 0.3% consensus forecast, while annual growth picked up to 2.1%, above estimates of 1.8%. The robust figures indicate that economic activity remains resilient despite the Reserve Bank’s efforts to cool demand and tame persistent inflation.
Following the GDP release, markets increased the implied probability of a fourth rate hike at the September meeting to 57%, up from 48%, while a November hike is now more than fully priced in. The likelihood of another increase in Q1 2027 also rose to 82% from 62%.
At the same time, worries over potential oil supply disruptions amid the escalating US–Iran conflict have driven energy prices higher, intensifying inflationary pressures. However, gains in the Australian dollar were capped by a stronger US dollar, as rising US yields bolstered demand for safe-haven currencies.
