The Australian dollar weakened to around $0.700 on Wednesday, hitting a four-week low, as escalating geopolitical risks outweighed better-than-expected domestic GDP figures. Data showed the economy expanded 0.8% in Q4 2025, while annual growth hit 2.6%, topping estimates and marking the fastest pace in almost three years. While the report confirms solid economic momentum, it failed to firmly justify a follow up rate hike later this month. Market pricing currently implies just around a 30% chance of a March hike, while a quarter-point increase to 4.10% remains fully priced for May. The expanding conflict in the Middle East, which has rattled markets globally, overshadowed the strong GDP numbers and weighed on the risk-sensitive Aussie. Markets are closely monitoring the potential impact of these tensions on growth and inflation. On Tuesday, Governor Michele Bullock said the central bank remains “very alert” to such risks and ready to respond with tighter monetary policy if needed.