Sharp GDP correction forces AUD lower
Daily Currency UpdateThe AUD drifted lower through trade on Wednesday amid weaker than anticipated Q2 GDP data and a sustained USD bear market bounce. Second quarter GDP data showed the economy contracted at its fastest pace on record, plunging 7%, well beyond market estimates at 6%. Analysts had anticipated a sharp adjustment as the country grappled with the effects of COVID-19 imposed lockdowns but the larger than expected decline suggests the RBA will need to do more to fuel the economic recovery with a return to pre-covid levels not expected until at least 2023. The AUD slipped below 0.7350 to touch intraday lows at 0.7301 overnight as the USD found renewed support, bouncing of 28 month lows to outperform all major counterparts.
Having failed to extend beyond resistance at 0.74/0.7410 we expect the AUD will fluctuate between support and resistance, bouncing off 0.7260 while retreating on moves approaching 0.74 ahead of a new catalyst to drive direction. With little of note on today’s docket attentions turn to US non-farm payroll data Friday as a key marker into the weekly close.
Key MoversThe USD outperformed major counterparts through trade on Wednesday, bouncing off 28 months lows. The BBDXY was up 0.5% on the day despite weaker than anticipated leading employment data. ADP non-farm payrolls rose at half the pace expected, opening the door to a softer NFP print on Friday.
The Euro retreated Wednesday slipping back below 1.19 to touch 1.1825. Having touched 1.20 early this week profit taking and a correction in long positions forced the single currency lower, while a fall in European interest rates helped fuel USD yield support.
Attentions now turn to Fridays US non-farm payroll print. While there are some signs the US economy is recovering, gains are modest and well below pre-covid levels. With new infection rates still alarmingly high and fiscal support wanting we expect the USD downtrend will resume in the weeks and months ahead.
- AUD/USD: 0.7260 - 0.7410 ▼
- AUD/EUR: 0.6080 - 0.6230 ▲
- GBP/AUD: 1.8020 - 1.8480 ▲
- AUD/NZD: 1.0780 - 1.0920 ▼
- AUD/CAD: 0.9480 - 0.9630 ▼