AUSTRALIAN DOLLAR HITS ONE-MONTH HIGH AFTER GDP; EURO FALLS
The Australian dollar rose to monthly highs on Wednesday after government data showed stronger than expected first-quarter growth. Meanwhile, the euro slumped against a rebounding US currency ahead of a deluge of volatile market events.
The Australian economy expanded slightly faster than expected in the first quarter, although the underlying pace of growth was significantly weaker than the previous period. Gross domestic product (GDP) expanded at a seasonally adjusted 0.3% in January-March, following a 1.1% uptick the previous quarter, the Australian Bureau of Statistics reported Wednesday. Analysts in a median estimate called for 0.2% growth.
Although 17 of 20 industries reported growth, net exports and dwelling investments were a drag on GDP.
The Australian dollar was up 0.6% to 0.7555 US, where it was trading near session highs.
The euro came under pressure in mid-week trading, as traders turned their attention to an upcoming meeting of the European Central Bank (ECB). In economic data, German factory orders declined much more rapidly than expected in April, raising concerns about the health of Europe’s largest economy.
German factory orders, a barometer of manufacturing demand, fell 2.1% from March, the Federal Statistical Office said on Wednesday. Analysts in a median estimate called for a 0.4% decline. In annualized terms, factory orders rose 3.5%, official data showed.
The US dollar was trading higher against a basket of world currencies. The dollar index rose 0.3% to 96.88, rebounding from eight-month lows.
A stronger dollar weighed on precious metals ahead of the New York trade, with gold and silver prices easing off multi-week highs.
The AUD/USD notched fresh gains on Wednesday and appears poised to test the 0.7586 resistance, which represents the high from 24 April. The pair has already cleared the intraday resistance hurdle near 0.7530. On the opposite side of the ledger, a breach of the psychological 0.7500 support would likely favour a pullback toward 0.7416, which is the low from 30 May.
A rebounding US dollar undermined the euro on Wednesday, with the EUR/USD exchange rate falling back toward the 1.12 handle. The pair was last down 0.5% at 1.1218, having fluctuated within a daily range of 1.1208 and 1.1282. The euro is currently testing daily lows. It faces major resistance up near the 1.13 handle, which looks exceedingly out of reach after the latest correction.
Following a series of higher highs, gold prices approached $1,300 a troy ounce on Tuesday for the first time this year. However, the bulls have since tempered their expectations as markets awaited the upcoming UK parliamentary election. Traders can expect a possible rally for gold in the event the Conservative party loses its majority in Thursday’s vote.