The Australian dollar is lower ahead of GDP data

Photo by Yuli Seperi/Getty Images
  • The Australian dollar fell out of favour with traders on Wednesday, falling heavily against the greenback and major crosses.
  • European currencies were the standard performers, benefiting from headlines on the future direction of monetary policy and strong data.
  • Australia’s Q1 GDP report will be released today. A strong increase is expected.

After being the standout performer a session earlier, the Australian dollar fell out of favour with traders on Wednesday, falling heavily against the greenback and major crosses.

Here’s the scoreboard as at 7am in Sydney.

AUD/USD 0.7616 , -0.0027 , -0.35%
AUD/JPY 83.62 , -0.30 , -0.36%
AUD/CNH 4.8694 , -0.0244 , -0.50%
AUD/EUR 0.6500 , -0.0033 , -0.51%
AUD/GBP 0.5685 , -0.0056 , -0.98%
AUD/NZD 1.0838 , -0.0032 , -0.29%
AUD/CAD 0.9869 , -0.0017 , -0.17%

After climbing to six-week highs on Tuesday on the back of robust Australian economic data, the AUD/USD went into reverse on Wednesday, adding to earlier losses in European trade.

The Aussie was undermined by the release of strong US economic data released during the session, along with flows towards European currencies.

As seen in the chart below, the AUD/USD briefly dipped below the 76 cent level before recovering in late trade, helped in part by a rebound in US stocks.

AUDUSD Hourly Chart

Against the crosses, the Aussie fell heavily against the euro and British pound — the former helped by speculation over the future of ECB monetary policy settings while the latter benefited from strong PMI data for May.

“The ECB confirmed that they will debate the exit of their quantitative easing policy at next week’s June 14 meeting,” said Richard Gracem Chief Currency Strategist at the Commonwealth Bank.

“The ECB is scheduled to end its QE programme in September.”

That helped to offset renewed political jitters in Italy which saw Italian bond yields lift sharply, reversing some of the declines seen in previous session.

“Italian 10-year government bond yields lifted 26 basis points to 2.76% after newly-appointed Italian Prime Minister Giuseppe Conte addressed the Italian parliament, passed a confidence vote, and delivered his maiden speech,” Grace said.

“Conte set out his government’s agenda over the coming years, including a series of populist measures including his citizen’s income measure, curbs on immigration, boosting spending on the unemployed, and large scale tax cuts.

“These measures were well telegraphed, but there were no details on the specific costs.”

The British pound also found buying support as its services PMI reading rose to 54.0, above the 53.0 level expected.

Turning to the session ahead, movements in the Aussie look set to be dominated by the release of Australia’s Q1 GDP report at 11.30am AEST.

A quarterly increase of 0.9% is expected, an outcome that should see year-on-year growth lift to 2.8%. Most economists believe the risks to the quarterly figure are to the upside.

This 10-second guide has more on what to look out for in the report.

Aside from the GDP report, other data highlights today include trade and labour cost figures from the US along with trade and PMI data from Canada.

The quiet data calendar later in the session points to the likelihood that broader movements will be dictated by sentiment, techinicals and headlines.

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