As far as I can tell this is a bug in the Native App, and I’m also using version 1.7.0 on Mac OS. It happened to me a couple of weeks ago when logging in for the first time to a new instance. In the first login attempt on instance #1I got the exact same message as you. I swear I had the password correct and so tried again, and it logged me in.
A minute later I tried logging into instance #2 and had the same result: error message. I thought something was fishy cause it was the exact same password I was using on instance #1 (these are spec installs, not the real deal). I re-typed in the password and it let me in.
Today I signed into yet another spec instance (#3), pasted in the password, got the error message, pasted in literally the exact same password from the clipboard, hit “try again” or “login” (or whatever the button says) and it worked fine.
So as far as I can tell there’s a bug whereby the first login attempt doesn’t work, but the second does.
Edit: If it makes a difference, instances #1 and #2 were on Ghost version 2.23.3, instance #3 which I just logged into a moment ago via the Native App is on version 2.25.3.