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Australian GDP beats expectations.

Written by Sam Coxhead on June 6th, 2012.      0 comments

1:53 PM (NZT) Just released first quarter GDP numbers in Australia reveal  demonstrably stronger growth than expected. The 1.3% rise in activity (+.5% expected) was coupled with an upward revision of growth in the 4th quarter of 2011 as well. Mining and financial services producing the bulk of the growth in activity.
Following the 25pt cut to the cash rate yesterday, the market had fully priced another 25pt easing to come at the next meeting. This number may see a review of this pricing, especially if the employment numbers hold up well tomorrow.
Strong AUD demand has ensued as one would expect. Given the heavy nature of the AUD of late, there is further potential for upside should the “short squeeze” continue.
In the offshore markets the sentiment was again choppy, but it found a firm footing into the end of the US session. Better than expected US services numbers were coupled with positive comments from G7 and European finance officials. Peripheral European debt markets were slightly more buoyant. When US FED member Evans commented that he thought extremely strong policy accommodation was needed, demand for risk assets increased again. Report that China will cut rates to stimulate their domestic economy also helped demand for both the AUD and NZD.
Interestingly the latest Fonterra diary auction saw a sharp rise in prices fetched, increasing 13.5% on a trade weighted basis. This would have no doubt improved sentiment for the NZD also.
The Bank of Canada kept their cash rate unchanged as expected, and was relatively upbeat on domestic assessments.
The ECB are due to release the latest monetary policy decision later on today, and we get Australian employment numbers and the BOE tomorrow.
          Past 24 hours
  Current level Pre-AU GDP  % Chge since AU GDP   Low High
NZD/USD 0.7607 0.7593 0.18%   0.7514 0.7614
AUD/USD 0.9831 0.9773 0.59%   0.9733 0.9833
NZD/AUD 0.7739 0.7770 -0.40%   0.7730 0.7786
AUD/NZD 1.2922 1.2870 0.40%   1.2844 1.2937
NZD/GBP 0.4941 0.4936 0.10%   0.4899 0.4947
NZD/EUR 0.6101 0.6093 0.13%   0.6041 0.6106
NZD/YEN 59.82 59.73 0.15%   58.79 59.90
NZD/CAD 0.7876 0.7871 0.06%   0.7814 0.7889
Topics: Australian GDP, Fonterra auction