It's going to be an enormous session for the Australian dollar

Photo by ChinaFotoPress/ChinaFotoPress via Getty Images

It’s June 1, the start of winter in the southern hemisphere and long summer days north of the equator. It’s a time when the economic data calendar heats up, and with it market volatility.

Today is no exception, with a swathe of major data releases in Australia and abroad set to push and pull the Australian dollar throughout Wednesday’s trading session.

The Australian dollar closed May buying .7229 against the US dollar, finishing the month with a decline of close to 5%.

AUD/USD Monthly Chart

Whether that trend is maintained in June, at least in the early parts of the month, will be determined by some seriously big data releases on Wednesday, none less than Australian Q1 GDP which will be released at 11.30am AEST.

With most of the major GDP inputs now received, expectations are high heading into the release, with economists forecasting a bumper quarterly growth of 0.8%. If realised, that will will see the year-on-year rate slow fractionally to 2.8%.

Some economists are more bullish than others, including those from the Commonwealth Bank, who are forecasting quarterly growth of 1.1%, leaving the year-on-year rate at a booming 3.2%.

To Elias Haddad, senior currency strategist at CBA, this should help boost the Australian dollar during Asian trade on Wednesday.

“We expect AUD/USD to lift above its 200-day moving average (0.7255) today on stronger Australian Q1 GDP growth,” says Haddad.

“Above trend Australian GDP growth removes some of the dis-inflationary pressure off Australia’s economy and significantly reduces, if not rules out, the chances of a 7 June RBA rate cut. This is supportive for a slightly higher AUD/USD,” he says.

Although a huge quarterly increase in headline GDP will likely induce a sharp knee-jerk reaction higher for the Aussie as Haddad suggests, it must be remembered that this release is dated, telling markets where the economy has been rather than where it’s headed.

This often sees initial movements in the currency retrace in the period following the GDP’s release.

Outside of Australian GDP, there are any number of data releases that the potential to generate additional volatility in the Aussie.

Front-and-centre of this queue is the official Chinese manufacturing PMI report for May released at 11am AEST.

After printing at 50.1 in April, economists expect the gauge to tick down to 50.0 in May, something that would indicated that activity levels neither improved nor deteriorated over the month.

Haddad suggests that a reading above 50 will be supportive for risk assets, including the Aussie dollar.

“An above 50 print in today’s China May manufacturing PMI can further support AUD,” he wrote. “We expect a tick-up China’s manufacturing PMI to 50.2 in May from 50.1 the previous month because of some improvement in China’s housing market.”

Outside of the official PMI report from China, markets will also receive the separate Caixin-Markit China manufacturing PMI report — a survey focused on small to medium sized firms from China’s private sector — shortly after the official report hits at 11.45am AEST.

There will also be manufacturing PMI reports released from Australia, Japan and South Korea released over the session, although none are likely to be overly influential on currency market movements.

The PMI data deluge continues in Europe and North America later in the session, headlined by the US ISM manufacturing reading which will be released at midnight AEST.

As at 7.55am AEST, the AUD/USD buys .7229.

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