Key Moments
- Australia’s Q2 2026 GDP expanded 0.4% quarter-on-quarter, exceeding the 0.3% consensus and accelerating from Q1’s 0.3% rise.
- US 10-year Treasury yields climbed to 4.80% amid a global bond selloff, while higher oil prices revived inflation and rate-hike concerns.
- US data showed softer July JOLTS job openings and a lower August ISM Manufacturing PMI at 54.6, which remained in expansion territory.
Australian GDP Beat Lifts AUD/USD
AUD/USD edged higher after erasing earlier daily losses, with the pair trading near 0.7150 during Asian hours on Wednesday. The Australian Dollar (AUD) firmed following the release of domestic Gross Domestic Product (GDP) figures for the second quarter.
Quarter-on-quarter GDP in Australia increased by 0.4% in Q2 2026, outpacing both the 0.3% consensus forecast and the 0.3% gain posted in Q1. On an annual basis, GDP grew 2.1% year-over-year, slowing from 2.5% in the first quarter but still comfortably ahead of the market expectation of 1.8%.
| Australia GDP | Q1 2026 | Q2 2026 | Market Consensus |
|---|---|---|---|
| QoQ Growth | 0.3% | 0.4% | 0.3% |
| YoY Growth | 2.5% | 2.1% | 1.8% |
Despite the supportive domestic data, upside for AUD/USD could remain limited as US Dollar (USD) strength reasserts itself, driven by rising Treasury yields and higher crude prices that have revived worries about persistent inflation and the prospect of further interest rate hikes.
Rising US Yields and Oil Prices Underpin the Dollar
A broad-based selloff in global bonds pushed the yield on the US 10-year Treasury to 4.80%, its highest level since early 2025. The move in yields has reinforced demand for the USD and heightened concerns over tighter financial conditions.
At the same time, crude oil prices advanced amid escalating hostilities between the United States (US) and Iran, intensifying fears of potential disruptions to energy flows from the Middle East and adding to the inflationary backdrop.
Mixed US Data: Labor Softens, Manufacturing Still Expands
Recent US economic releases provided a mixed picture for investors. July JOLTS job openings rose to 7.27 million but failed to meet market expectations, signaling some cooling in labor demand.
The ISM Manufacturing PMI slipped to 54.6 in August from 55.6 previously. While the reading fell short of forecasts, it remained firmly above the expansion threshold, continuing to point to a solid manufacturing sector.
| US Indicator | Latest Reading | Prior Reading |
|---|---|---|
| JOLTS Job Openings (July) | 7.27 million | – |
| ISM Manufacturing PMI (August) | 54.6 | 55.6 |
Strategist View: Fiscal Risk Lurks Behind Dollar Strength
Commentary from strategists at Brown Brothers Harriman pointed to an ongoing debate around the drivers of higher US yields and the implications for the USD.
They noted that Bessent has “pushed back against claims that rising Treasury yields reflected mounting concerns over US fiscal policy,” instead emphasizing the recent “outperformance of US 10-year Treasuries relative to other major bond markets.” However, the strategists warned that this relative performance “does not make the fiscal risk disappear,” adding that increasing interest costs will eventually “push up the US Treasury term premium,” leaving the USD “more vulnerable to periods of fiscal stress.”
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