Australian Dollar rises as quarterly GDP grows in Q2
- Australian GDP grew 0.4% QoQ in Q2 2026, beating the 0.3% consensus forecast.
- The US Dollar gains on rising US Treasury yields and surging oil prices.
- July US JOLTS job openings fell short of forecasts, while ISM Manufacturing remained in expansion.
AUD/USD inches higher after recovering its daily losses, trading around 0.7150 during the Asian hours on Wednesday. The pair appreciates as the Australian Dollar (AUD) gains ground following the release of domestic Gross Domestic Product (GDP) data for the second quarter, which grew by 0.4% quarter-on-quarter in the second quarter of 2026, picking up pace from the 0.3% expansion recorded in the first quarter and beating market expectations of 0.3%.
Australia’s second-quarter GDP expanded by 2.1% year-over-year (YoY). While this marks a slowdown from the 2.5% growth seen in Q1, the result comfortably topped the market consensus forecast of 1.8%.
The upside of the AUD/USD pair could be restrained as the US Dollar (USD) strengthens, driven by rising bond yields and surging oil prices that reignited concerns over persistent inflation and potential interest rate hikes.
A global bond selloff pushed the US 10-year Treasury yield to 4.80%, reaching its highest level since early 2025. Adding to the inflationary pressure, crude oil prices jumped amid escalating hostilities between the United States (US) and Iran, raising significant risks of energy flow disruptions from the Middle East.
Economic data from the US presented a mixed backdrop for market sentiment. July JOLTS job openings rose to 7.27 million, coming in below market expectations. Simultaneously, the ISM Manufacturing PMI eased to 54.6 in August from 55.6. Although this missed forecasts, the reading remains firmly in expansion territory and continues to signal a healthy manufacturing sector.
Dollar resilience tempered by rising US fiscal risk
Strategists at Brown Brothers Harriman highlight that Bessent has “pushed back against claims that rising Treasury yields reflected mounting concerns over US fiscal policy,” pointing instead to the recent “outperformance of US 10-year Treasuries relative to other major bond markets.” However, they caution that such relative strength “does not make the fiscal risk disappear,” warning that rising interest expense will ultimately “push up the US Treasury term premium,” leaving the USD “more vulnerable to periods of fiscal stress.”
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.