The Australian dollar rallied back above the 75 cent level overnight, buoyed by an optimistic June monetary policy statement from the Reserve Bank of Australia and further US dollar weakness.
However, it finished mixed against the crosses, partially in response to expectations for a soft Australian March quarter GDP report that will be released later in today’s session.
Here’s the Aussie dollar scoreboard as at 6.55am AEST.
AUD/USD 0.7505 , 0.0022 , 0.29%
AUD/JPY 82.1 , -0.53 , -0.64%
AUD/CNH 5.0691 , -0.0048 , -0.09%
AUD/EUR 0.6655 , 0.0008 , 0.12%
AUD/GBP 0.5812 , 0.0013 , 0.22%
AUD/NZD 1.0438 , -0.0042 , -0.40%
“AUD/USD rallied overnight to near 0.7520 supported by yesterday’s constructive RBA monetary policy statement and a weaker USD,” said Elias Haddad, senior currency strategist at the Commonwealth Bank.
“The RBA maintained its forecast for GDP growth of ‘a little above 3%” over the next couple of years’, highlighting that business conditions have improved and capacity utilisation has increased.”
Those optimistic overtones helped the Aussie to recover after falling heavily earlier the session. And along with another bout of US dollar weakness driven by falling bond yields, it ensured that the Aussie rallied to a one-month high in overnight trade.
The AUD/USD currently sits just below its 200-day moving average of .7527.
After days of speculation as to how the economy performed in the first three months of the year, movements in the Aussie on Wednesday will be dictated by the release of Australia’s latest GDP report at 11.30am AEST.
A steep deceleration in growth is expected with the median economist forecast centred around an increase of 0.3%, leaving the year-on-year expansion at 1.6%, the smallest seen since the September quarter of 2009. Some are even forecasting a decline in GDP, something that will undoubtedly weigh on the Aussie should that eventuate.
However, while the report has the potential to generate short-term volatility, it must be remembered that this report reveals how the economy was performing over two months ago, not today or in the future.
That’s something to consider, particularly as financial markets are forward rather than backward looking. For those who are interested in the release, this 10-second guide has further information on what to expect.
Besides the GDP report, there’s little to interest traders across the Asian region.
The Ai Group will release Australia’s Performance of Construction Index for May while Japan will release its latest leading indicator — neither will move the Aussie.
The quiet data calendar continues this evening with the final print of Q1 GDP in the Eurozone and US consumer credit the only releases of note.
Given a lack of market moving events, position adjustments ahead of key data, political and central bank meetings, may also be a factor during the session.
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