Aussie steadies near $0.71 after stronger Q2 GDP lifts hike odds

The Australian dollar steadied around $0.71, holding recent losses as investors weighed stronger-than-expected GDP figures that strengthened the case for another interest rate hike.

The economy expanded 0.4% quarter-on-quarter in Q2, beating forecasts for 0.3% growth, while annual growth accelerated to 2.1%, above expectations for 1.8%.

The stronger reading suggested economic activity remains resilient despite the Reserve Bank's efforts to cool demand and curb persistent inflation.

Markets raised the odds of a fourth rate hike at the September meeting to 57% from 48% previously after the GDP release, while a November hike is now more than fully priced in.

The probability of another hike in Q1 2027 also rose to 82% from 62%.

Meanwhile, concerns over potential oil supply disruptions amid the escalating US-Iran conflict have pushed energy prices higher, adding to inflation pressures.

However, a stronger US dollar capped the Aussie as rising yields boosted demand for safe-haven currencies.