After breaking free from a recent run of declines the ‘Aussie’ advanced on the majority of its major currency counterparts during local trading and posted notable gains against peers like the Euro.
The Australian Dollar was broadly boosted after Australian growth data showed stronger-than-forecast expansion in the fourth quarter.
Economists had expected Australia’s economy to have grown by 0.7 per cent in the final quarter of last year following growth of 0.6 per cent in the third quarter.
However, the South Pacific nation actually enjoyed expansion of 0.8 per cent.
On the year the economy grew 2.8 per cent in the fourth quarter, significantly more than the 2.5 per cent forecast.
Third quarter annual growth was positively revised to 2.4 per cent.
As Australian economic data has been patchy lately this upbeat report was a pleasant surprise.
The result also supports the case for the Reserve Bank of Australia leaving interest rates unaltered.
As chief economist Paul Bloxham observed; ‘The clearest message from these national accounts is that the rebalancing act is under way, and that will be a great comfort for the RBA. Rate cuts are off the table. Indeed, the evidence is starting to build that interest rates may have to rise before the end of the year.’
Additional ‘Aussie’ gains were enabled by unexpectedly positive Chinese news. The HSBC/Markit Services PMI rose from 50.7 to 51 (moving further away from the 50 mark separating growth from contraction).
The Australian Dollar was further supported by the news that Russia’s President doesn’t see any immediate need to invade Ukraine. With tensions ebbing and appetite for higher-risk assets returning the ‘Aussie’ consolidated its advance at the close of the Australasian session.
Meanwhile, the Euro softened slightly ahead of the publication of Eurozone retail sales and growth data as investors debated the likelihood of the European Central Bank introducing additional stimulus when it meets on Thursday.
The common currency was boosted early into the European session as measures of the French, Italian and German services industry were positively revised.
Although the French services PMI remained below the 50 mark separating growth from contraction, the rate of contraction wasn’t as severe as formerly estimated. Italy’s services industry unexpectedly returned to growth while the German gauge came in at 55.9 rather than 55.4.
In a data heavy day the EUR/AUD pairing is likely to experience significant additional movement.
Today’s US mortgage applications and ADP employment change report may also trigger market fluctuations.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.3733,
Euro,,British Pound,0.8235,
Euro,,Australian Dollar,1.5318,
Euro,,New Zealand Dollar,1.6350,
Euro,,Canadian Dollar,1.5214,
[/table]
