The Australian dollar climbed to its strongest level since mid-May during Monday's European trading session, with the AUD/USD pair rising 0.25% to near 0.7220. This move came as robust second-quarter GDP figures from Australia reinforced market expectations for another rate hike from the Reserve Bank of Australia this month.

The country's GDP expanded 0.4% quarter-on-quarter and 2.1% year-on-year, both exceeding market forecasts. According to Rabobank, these results have essentially cemented the case for a rate increase at the upcoming RBA meeting, prompting traders to price in additional tightening and lifting the currency to a three-month high.

As a high-yielding commodity currency, the Australian dollar continues to benefit from a favorable interest rate differential and supportive risk appetite. Market attention now shifts to Tuesday's scheduled remarks from RBA Deputy Governor Hauser, with any hawkish commentary potentially pushing the currency toward 0.7250 or beyond.

However, upside momentum may be tempered by renewed expectations for US rate hikes and fluctuating global risk sentiment. Should the greenback strengthen on upcoming data or risk assets experience a pullback, the Aussie's advance could lose steam. Overall, the impressive GDP print provides solid fundamental support, but external factors will ultimately determine the sustainability and magnitude of any further gains.

Turning to the US side, August non-farm payrolls added 162,000 jobs, beating expectations and lifting the probability of a September rate hike from 51% to 62%. Despite this, the US dollar failed to strengthen significantly. Commerzbank noted that the jobs report alleviated labor market concerns, positioning this week's PPI and CPI releases as the most critical inputs ahead of the September FOMC meeting.

If US inflation data comes in moderate, rate hike expectations may subside, pressuring the dollar and opening further upside for the Australian dollar. Conversely, hotter-than-expected inflation would reinforce the case for tightening, supporting the greenback and limiting the Aussie's gains. The currency's status as a high-yielding commodity play continues to underpin its strength through both interest rate advantages and risk-on dynamics.

In the near term, AUD/USD is expected to trade within a 0.7150-0.7250 range as markets await guidance from RBA officials and US inflation data. Any hawkish signals from Hauser or subdued US price figures could propel the pair toward 0.7250, while a dovish tone or hot CPI reading might see it retreat toward 0.7150.

At 16:09 Beijing time, the Australian dollar was trading at 0.7222/23 against the US dollar.