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Optimism bolstered for the U.S Economy

By Joel Holmes

The Australian dollar enjoyed mixed fortunes through trade on Wednesday rallying throughout domestic trade before profit taking and upbeat U.S macroeconomic data enabled a correction and reversal of local gains. The AUD found support early following stronger than anticipated Q2 construction; the strong read acts as a positive precursor to next week’s GDP print and hints, possibly, at an uptick in employment and consumer spending. Touching intraday highs at 0.7997 the AUD then met selling pressures as investors took profit and forced the unit gradually lower. Moving back through 0.7950 upbeat U.S preliminary GDP and employment data helped fuel a Greenback rally as investors unwind short positions; touching intraday lows at 0.7893 the AUD opens this morning buying 0.79 U.S cents as attentions turn domestic Private Capital Expenditures and a key U.S inflation print for direction into Non-farm payroll numbers Friday.  

The New Zealand dollar shifted gradually lower throughout trade on Wednesday relinquishing early gains and moving back below 0.72 U.S cents. Commentary from RBNZ Governor Graeme Wheeler placed early pressure on the local unit as the central bank figurehead suggested a “lower NZD was needed”. While such sentiment did not surprise markets, when coupled with stronger than anticipated US ADP non-farm payroll data and preliminary GDP numbers the Kiwi was forced to intraday lows at 0.7190. Having maintained wider ranges between 0.7190 and 0.73 throughout the past fortnight a move below this point of key technical support could signal a wider correction and deeper reversal back toward 0.70 and 0.69. Attentions now turn to domestic business confidence and key U.S inflation data for direction through trade on Thursday.   

The Great British Pound managed to hold onto its position above 1.2900 when valued against its American counterpart despite upbeat data in the United States. With British Net Lending to Individuals slowing to GDP 4.8bn and stronger ADP Non-Farm payroll and prelim GDP out of the Unites States, Cable initially saw downward movement to intraday lows of 1.2878. Sterling finished square for the day, regaining losses to see it trade back into familiar sideways territory with a top overnight of 1.2936. A third round of Brexit talks continue this week as the UK and EU remain deadlocked in key areas of negotiations which finish on Thursday. The Great British Pound opens higher this morning at 1.6350 against the Australian Dollar and 1.7940 when valued against the Kiwi.

US equity markets rose for a fourth consecutive day whilst the world’s reserve currency continued its rebound from levels not witnessed in more than two years. In what was mainly data lead story overnight, optimism which surrounds the growth trajectory of the US economy was bolstered following the release of a second-quarter GDP print which showed growth had accelerated at its fastest pace in two years, momentum supported mainly by stronger than expected household spending and gains in business investment. Rallying by 0.4 percent, the Greenback has outperformed across the board over the past 24 hours with the Euro subsequently losing 0.7 percent. Whilst the euro opens lower this morning at a rate of 1.1890,  in what’s likely to remain a common theme towards the backend of this week, US non-farm payrolls on Friday will again be looked towards as a key driver of US dollar price activity.