FX market outlookPosted on Wednesday, December 7 2016 at 8:41 am GMT+0000
Aussie drops on negative Australian GDP number.
The Australian dollar was one of the worst performing major currencies in today’s Asian session after GDP data showed the Australian economy contracted more than expected in the third quarter.
The aussie tumbled to $0.7415 from $0.7473 in reaction to news of the worst contraction since the financial crisis. Third quarter GDP fell 0.5% quarter-on-quarter and was the first negative result since the first quarter of 2011. In the previous quarter, GDP rose a revised 0.6%. Today’s number was much worse than what economists expected and brought the year-on-year growth rate to 1.8%. The disappointing data increased expectations that the RBA would cut rates in 2017.
The euro was flat against the dollar today, after having weakened on Tuesday. But the single currency remains above the key $1.07 level and losses were limited after Italy’s “No” vote on Sunday. The next risk event for the euro will be the ECB policy meeting on Thursday and investors are likely to remain cautious, leading to subdued action in the currency.
Thursday’s ECB meeting is considered to be important as many look to see if the central bank will indicate its intentions on the asset purchase programme. Many expect to see some details in terms of duration, pace and main parameters of the QE programme, which ends in March 2017. Some economists expect QE to be extended for another 6 months to September 2017.
The pound slid to $1.2645 to extend Tuesday’s losses. Sterling made large gains recently to rise above the key $1.2700 level after Brexit minister David Davis commented in Parliament that the UK might be willing to pay into the EU budget to retain access to EU single market.
The dollar edged higher to a session high of 114.37 yen, as the US dollar index steadied at 100.48.
Oil prices remained weak after retreating since Monday and giving back some of last week’s gains made after an OPEC agreement to cut output levels. Brent crude slid to $53.32 a barrel while WTI crude traded to a session low of $50.35 a barrel.
Gold was flat at $1,165.44 an ounce.
The economic data for the rest of the day include UK industrial production figures and the Bank of Canada policy decision.