The Australian dollar had a quiet session overnight, clinging onto gains achieved during the Asian session following the release of Australia’s Q1 GDP report.
While quarterly growth, at 0.3%, was in line with market expectations, many had adopted the view that the figure would be significantly weaker, leading to the pop in the Aussie against not only the US dollar but also the major crosses.
“Positioning in the market had swung towards Australia recording a negative quarter of GDP growth, so the as-consensus number of 0.3% GDP growth generated a large 0.9% lift in AUD,” said Richard Grace, chief currency strategist at the Commonwealth Bank.
That continued to benefit the Aussie in overnight trade despite weakness across commodity markets.
Crude oil tanked 5% while iron ore prices — Australia’s largest goods export by dollar value — fell to a fresh 11-month low.
Still, as seen in the scoreboard below, that wasn’t enough to ruffle the Aussie’s feathers in overnight trade.
AUD/USD 0.7550 , 0.0044 , 0.59%
AUD/JPY 82.89 , 0.77 , 0.94%
AUD/CNH 5.1136 , 0.044 , 0.87%
AUD/EUR 0.6706 , 0.0052 , 0.78%
AUD/GBP 0.5824 , 0.0012 , 0.21%
AUD/NZD 1.0489 , 0.0045 , 0.43%
At one point in overnight trade, the AUD/USD rose to as high as .7566, leaving it at the highest level since April 25.
Grace says that also saw the AUD/USD close above its 200-day moving average of .7529 for the first time since April 24.
“Paying attention to the ‘technical support’ of the 200-day moving average is warranted,” he says.
Turning to Asian trade on Thursday, early moves are likely to be dominated by the release of trade data from Australia and China.
Locally, Australia’s trade surplus is expected to narrow to $1.9 billion in April, down from $3.1 billion in March.
“[The] April trade balance is expected to narrow sharply,” said Imre Speizer, senior market strategist at Westpac. “Coal earnings are to drop $1.55 billion from weather disruption, metal ores down $0.9 billion on prices, while imports are likely to fall $0.3 billion due to a correction in fuel imports.”
The Australian trade report will be followed by the release of China’s latest trade snapshot, only for May, not April.
From a year earlier, exports are expected to grow 7% in US dollar terms, down from 8% in April, while imports are also tipped to slow, decelerating to 8.5% from 11.9% reported previously.
The trade surplus is forecast to swell to $US46.32 billion, up from $US38.05 billion in April.
After the twin trade reports, market attention will quickly turn to what some are calling “Triple Threat Thursday” — the UK general election, the ECB June monetary policy meeting and former US FBI director James Comey’s testimony before a US Senate committee.
After dominating market chatter in recent weeks, Ray Attrill, head of FX strategy at the National Australia Bank, says Comey’s testimony may now be the least interesting event of the three given Comey released a statement overnight ahead of his appearance.
“The pre-release of his prepared testimony overnight suggests that while he will confirm that the President leant on him to end the enquiry into National Security Advisor Michael Flynn he stops short of suggesting the President may have obstructed justice,” says Attrill.
In terms of the ECB, market attention will be on what changes, if any, the ECB will make on its forward guidance on interest rates, along with its updated assessment on the risks for growth and inflation.
The final of the “threats” — the UK general election — will likely dictate trade in Asia tomorrow with exit polls likely to arrive just after 7am AEST.