Australian Dollar gathers strength above 0.7000 amid softer US GDP data

The AUD/USD pair gathers strength to near 0.7035, the highest since June 17, during the early European session on Friday. Expectations that the Reserve Bank of Australia (RBA) might implement another interest rate hike this year underpin the Australian Dollar (AUD) against the US Dollar (USD). 

The RBA hawkish bias has prompted markets to continue to fully price in one more rate ‌hike this year, which would take the Official Cash Rate (OCR) to 4.6%, lifting the Aussie. RBA Governor Michele Bullock on Tuesday warned that underlying inflation remained too high and a further slowdown in domestic demand may be required to tame prices. Bullock added that policymakers were prepared to raise interest rates again if needed.

"The Board is prepared to act as required to achieve its mandate, including by increasing the cash rate further if needed,” said Bullock. 

The downbeat US economic data could also weigh on the Greenback and act as a tailwind for the pair. Data released by the Bureau of Economic Analysis on Thursday showed that the US Gross Domestic Product (GDP) grew by 1.5% in the second quarter (Q2) of 2026, marking a slowdown from 2.1% growth in Q1. This figure came in weaker than the market expectation of 2.1%. 

On the other hand, escalating tensions in the Middle East could boost safe-haven flows, supporting the USD. Iranian Parliament Speaker Mohammad Bagher Ghalibaf on Thursday denounced the US attack on civilian homes on Qeshm Island, describing it as a continuation of American crimes in the southern Iranian cities of Minab and Lamerd. Earlier Thursday, the US launched missile strikes across southern Iran, including Qeshm Island as well as parts of Bushehr, Fars and Khuzestan provinces.

RBA keeps pressure on prices as labour market stays resilient

BNY’s Geoff Yu notes that RBA Assistant Governor Sarah Hunter reiterated that “inflation remains above the 2-3% target band” and stressed the central bank “must keep pressure on price growth so higher inflation expectations do not become entrenched.” On the labour side, Yu highlights Hunter’s assessment that conditions are “still somewhat tight,” with job growth having held up “not too badly” in the first half of the year, underscoring the RBA’s cautious stance even as headline price pressures have eased slightly.