Gross Domestic Product (GDP) performance will largely dictate the direction of an economy’s domestic currency. This is because it is a measure of economic performance. When it posts a strong figure this leads to higher inflation, higher interest rates, thus a higher domestic currency.
In this light, the US is facing a downward revision on their preliminary GDP reading. This result is usually known well in advance as other releases will generally give an indication of the economic health of a country, production being one of those.
Therefore we may see an AUDUSD movement after the release tonight, given that this figure is regarded as tier one data. The figures from this result are expected to fall to -0.5% from last month’s figure of 0.1%. That is more than half a percent of movement based on a highly regarded figure. If the actual figure comes out above that (i.e. actual better than -0.5%) we may see some strength in the USD. However, if the release comes out below expectations (i.e. actual figure worse than -0.5%) we may see a sharp increase in the strength of the AUD in comparison to the USD.
AUD Capital expenditure is set to come out today at 12.30pm AEST. The expected figures are looking bullish for the AUD as they are expected to be -1.4%, which would be a sharp increase from last quarter’s surprisingly negative result of -5.2%. Although the expectation for this release is still at a negative figure, it is still an improvement; therefore investors may act positively to the news, depending on actual figures.
Keep an eye for tonight’s US GDP result as it has potential to bring the AUD/USD to new levels and ultimately affect end value.