Australian Dollar holds losses below 0.7200 after weaker GDP data, US-Iran tensions
- AUD/USD softens to near 0.7180 in. Wednesday’s early Asian session.
- Australian GDP grew 0.3% QoQ in Q1 of 2026, weaker than expected.
- US forces conduct strikes after Iran's attack, CENTCOM said.
The AUD/USD pair declines to around 0.7180 during the early Asian session on Wednesday. The Australian Dollar (AUD) weakens against the US Dollar (USD) following a downbeat domestic Gross Domestic Product (GDP) report. Traders will closely monitor the US May employment data, which will be released on Friday.
Data released by the Australian Bureau of Statistics (ABS) on Wednesday showed that the Australian economy grew 0.3% QoQ in the first quarter (Q1) of 2026, compared to the 0.8% growth in Q4. This reading came in weaker than the 0.5% expansion expected. Meanwhile, the annual first-quarter GDP expanded by 2.5%, compared with the 2.6% growth in Q4, below the market consensus of a 2.7% increase.
The Aussie attracts some sellers in an immediate reaction to the downbeat economic data, as it might prompt markets to expect a more dovish stance from the Reserve Bank of Australia (RBA).
Elsewhere, China's Services Purchasing Managers' Index (PMI) improved to 54.4 in May, up from 52.6 in the previous reading, according to RatingDog on Wednesday. This figure came in stronger than the market expectations of 52.3.
Broader geopolitical uncertainties might keep traders on edge and underpin a safe-haven currency such as the Greenback. The United States Central Command (CENTCOM) said on Tuesday that it had intercepted and defeated a series of Iranian missile and drone attacks targeting regional neighbors, including Kuwait and Bahrain, while also carrying out self-defence strikes on Iran’s Qeshm Island, per ABC News.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
