The Australian Dollar to Euro (AUD/EUR), Australian Dollar to Pound Sterling (AUD/GBP) and Australian Dollar to US Dollar (AUD/USD) exchange rates were all trending higher in Wednesday’s European session after Australian Gross Domestic Product (GDP) ecostats printed more favourably than economists had expected.
The Australian GDP stat fell from a downwardly revised 2.4% to 2.3% on the year in the first quarter rather than sinking to 2.1% as forecast. But the figure has been deemed an illusion as the Australian economy struggles to grow.
NAB chief economist Alan Oster commented: ‘You’ve got consumption growing at about 0.5% which is really weak, you’ve got a lot of growth in construction of apartments and that sort of thing, but you’ve got a big hole in business investment which is driven mainly by engineering construction. The total economy is growing 0.9% but the local economy, outside the stocks and the exports is basically zero.’
Eurozone Domestic Data Picks Up, Allowing EUR to Climb Amid Greek Situation
Meanwhile, in the Eurozone, domestic data improved slightly amid ongoing Greek negotiations. Eurozone Retail Sales increased by 2.2% in April on the year from the former month’s 1.6% and bypassing the 2.0% forecast.
Additionally, the Eurozone’s Unemployment Rate sank from 11.3% to 11.1% in April rather than residing at 11.2% as expected.
The European Central Bank (ECB) will release its latest interest rate decision later in Wednesday’s European session, followed by a press conference by ECB President Mario Draghi.
Pound Sterling (GBP) Drops as UK Service Sector Growth Falls
Across the water in the UK, the Pound Sterling (GBP) exchange rate sank after Markit’s UK Services Purchasing Managers Index (PMI) slipped from 59.5 to 56.5 in May, rather than taking the smaller drop to 59.2 economists had forecast.
As the UK service sector is considered to be the largest driver of economic growth, the fall caused investors to re-evaluate their Bank of England (BoE) interest rate hike bets.
US Change in Non-Farm Payrolls, Unemployment Rate and ISM Non-Manufacturing Composite Forecast to Cause USD Movement
The US is also in for a major day today with the release of the ISM Non-Manufacturing Composite index. Economists have suggested a fall will take place from 57.8 to 57.0 in May, which could be a development that sees the US Dollar (USD) exchange rate drop.
However, investors will be looking ahead to Friday’s highly influential US Change in Non-Farm Payrolls and US Unemployment Rate figures for guidance of the potential timeline for US Federal Reserve interest rate hikes and therefore Friday will also be a major day for USD movement.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is trending at 0.5087. The Australian Dollar to Euro (AUD/EUR) exchange rate is trending in the region of 0.6989. The Australian Dollar to US Dollar (AUD/USD) exchange rate is trending in the vicinity of 0.7770.