AU GDP sinks the AUD to a four year low

FX markets overnight have been focused on the AUD, which traded to a fresh  four-year low following a GDP reading in Australia that suggests Australia is in a technical wage recession. The consensus forecast was for a rise of 0.7% quarter-on-quarter, and year-on-year figure of 3.1%, but the reality was a dismal reading of 0.3% and 2.7% respectively, which was led by a sharp weakness in investment at -2.7% for the quarter. The reading seems to have turned the view that the next move by the RBA may be a cut and could come as early as Q1 2015. This is despite the OECD being quoted last week saying that the next move by the Australian Central bank will be to hike rates as they attempt to cool signs of an asset bubble in the form of the housing market.

The ‘buy dollars wear diamonds’ tone remains intact ahead of the ECB meeting tomorrow, following the positive tone on the US economy from Federal Reserve’s Vice Chair Stanley Fischer. The focus was on the positives of a weaker oil price on the US consumer and not the inflation concerns that have been hanging over the market of late. He suggested the FOMC is nearing the end of it ‘considerable time’ pledge with regards to rates being on hold.

The focus will be on proud pound at lunchtime today as UK Chancellor George Osborne delivers the UK Autumn budget statement before the next general election in five months’ time. The deterioration in the UK’s fiscal position is likely to be highlighted, as further fiscal measures are likely to be needed following the election in May which will likely put a restraint on the growth outlook. The media speculation is that the Chancellor will try to win support by making reforms to stamp duty on house prices along whilst extending the government’s ‘help to buy scheme’.

The data events today consist of the UK services PMI, EU retail sales and GDP, as the ADP survey from across the pond will possibly give the market a gauge for NFP’s on Friday as the Beige book release this evening will provide a snapshot of the US economy across all regions.

EUR/USD

Supports 1.2300-1.2240-1.2180  | Resistance 1.2400-1.2430-1.2485

USD/JPY

Supports 119.10-118.80-118.20  | Resistance 119.50-119.85-120.00

GBP/USD

Supports 1.5625-1.5585-1.5535  | Resistance  1.5680-1.5720-1.5765