AUD Surges as Q2 GDP Growth Defies Expectations

The Australian Dollar strengthened against major currencies after the release of second-quarter GDP data showed a faster-than-expected pace of growth. The economy expanded by 0.9% quarter-on-quarter and 3.4% year-on-year, surpassing market forecasts of 0.7% and 3.0%, respectively.

The upbeat reading reduced bets on near-term interest rate cuts by the Reserve Bank of Australia (RBA), providing a fresh tailwind for the currency. Household spending, government investment, and net exports all contributed positively to growth, offsetting weakness in residential construction and business inventories.

The data prompted traders to trim expectations for RBA easing, with money markets now pricing a lower probability of a rate cut before the end of the year. This shift in rate expectations supported the Aussie, as higher yields typically attract foreign capital inflows.