AUD/USD pullback deepens on risk-aversion flows despite firm Q2 GDP

AUD/USD falls despite strong GDP

AUD/USD has extended its pullback from last week's 15-week high of 0.7207 as risk-aversion flows into the US dollar outweigh this morning's resilient second quarter (Q2) gross domestic product (GDP) report.

The report showed Australian GDP increased by 0.4% in Q2 2026, modestly stronger than the 0.3% print recorded in the prior quarter. This saw the annual rate of growth rise to 2.1% year-on-year (YoY), easing from 2.5% in the prior quarter, but comfortably above the 1.8% expected. It was the Australian economy's 19th consecutive quarter without a contraction.

Grace Kim, Australian Bureau of Statistics (ABS) head of National Accounts, said: 'Economic growth remained subdued in the June quarter as households continued to behave cautiously. While increased spending and business investment occurred in pockets of the economy, imports supported much of the growth, moderating its contribution to overall GDP growth.'

The main driver of the increase was households. Household spending rose 0.4% and contributed 0.2 percentage points (ppt) to GDP, with vehicle purchases doing much of the heavy lifting as households continue to transition to electric vehicles (EVs).

Inside the Q2 GDP report:

• GDP per capita was flat quarter-on-quarter (QoQ) and rose 0.7% through the year. That follows a 0.1% fall in the March quarter, so the per-capita slide stalled.
• The household saving-to-income ratio edged up to 6.5% from 6.4%. Compensation of employees rose 1.5% as wages, bonuses and some redundancy payments flowed through.
• Household spending rose 0.4% and contributed 0.2ppt to GDP. Discretionary spending led the rise, with nearly half of the increase coming from vehicle purchases. Essential spending fell 0.3%.
• Domestic final demand contributed 0.3ppt.
• Private business investment fell 0.5% after machinery and equipment spending dropped following the March quarter's data-centre surge. Much of that earlier fit-out was imported, which is why March net trade was so weak and June looks cleaner. Business investment is still 10.4% higher than a year ago.
• Inventories subtracted 0.1ppt. Mining stocks were drawn down as coal exports recovered after the cyclone-hit March quarter. Non-mining inventories rose as vehicle wholesalers and retailers stocked EVs.
• Net trade added 0.1ppt, the first positive contribution since December 2023. Exports rose 0.8% on coal, helped by a weather-related rebound and thermal coal standing in for liquefied natural gas (LNG). Services exports moved in the opposite direction, with weaker business, personal and education travel into Australia. Imports rose 0.5%.
• Public demand added 0.1ppt via government consumption. Terms of trade fell 1.6% as import prices for fuel and freight rose.
• GDP per hour worked was flat on the quarter and down 0.2% through the year. Real unit labour costs rose 0.9% QoQ.

While households were the main driver of growth in Q2, it was mainly cautious spending, with a large proportion directed towards EVs while travel and essential spending remained soft, and the saving rate edged higher.

RBA hike expectations strengthen

Nonetheless, stacked against last week's 3.6% trimmed mean inflation reading, today's GDP print is the final green light the Reserve Bank of Australia (RBA) needs to hike rates for a fourth time this year, with Melbourne Cup Day still the most likely date.

A second 25 basis point (bp) rate hike is now around 75% priced for March 2027, which would take the cash rate to 4.85%.

Despite that, AUD/USD is trading marginally lower on the day at around 0.7140 (-0.05%) as the greenback benefits from risk-aversion flows tied to the latest flare-up in the Middle East.

That has sent energy prices higher, fuelled inflation concerns and added to the march higher in global bond yields, all of which is hampering risk sentiment.

AUD/USD technical analysis

AUD/USD's decline from the early-May high of 0.7277 found support in late June at 0.6863, just ahead of the then 200-day moving average.

The rebound from that low extended last week, with AUD/USD trading above 0.7200 for the first time since late May. The sharp retreat from the 0.7207 high leaves open the possibility that the pair is carving out a weekly head and shoulders top (see the weekly chart below).

That pattern only confirms on a break of neckline support at 0.6870 - 0.6860, which would then open 0.6400 as the downside projection.

To negate that downside setup and put the May high of 0.7277 back in play, AUD/USD needs a sustained break above resistance at 0.7210 - 0.7220.

AUD/USD weekly candlestick chart

• _{Source: TradingView. The figures stated are as of 2 September 2026. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}