The greenback edged higher at the start of the Asian session, rallying sharply against the Aussie initially and pushing the sterling beneath the key 1.40-level. With US equity bourses still mired near its lowest levels in 12-years, risk aversion will continue to benefit the dollar - which has pushed the euro beneath the 1.25-handle.
US economic reports slated for release later today include the February ADP private sector payrolls, which are seen posting a loss of 615k jobs, deteriorating further from the loss of 522k jobs in January and non-manufacturing ISM. Consensus estimates for February non-manufacturing ISM call for a decline to 41.0 from 42.9, remaining mired beneath the key 50-level for its 5th consecutive month.
Traders will closely scrutinize Friday's key labor report given the weakness in the US jobs market. The unemployment rate in February is expected to spike to 7.9%, a level not seen since 1984 and up sharply from 7.6% from January. The non-farm payrolls figure is estimated to reveal a loss of 600k jobs - its worse level since 1974.
Aussie Slides on GDP Contraction
The Australian dollar plunged sharply in early Wednesday trading plummeting by nearly 100-pips from 0.6380 to 0.6283 following dismal growth data. The report revealed an unexpected contraction in Australia's GDP for the first time in 8-years, posting a 0.5% decline in Q4 versus calls for a 0.2% increase while edging up by 0.3% from the previous year.
The RBA's Assistant Governor Edey anticipates short-term weakness and deems Australia's risk of recession as borderline. The Reserve Bank of Australia surprised markets yesterday by leaving interest rates unchanged at 3.25%, with Bank Governor Stevens saying the Australian economy has not experienced the sort of large contraction seen elsewhere.
The Aussie recovered somewhat, recuperating above the 0.63-level to 0.6330. Nonetheless, the AUDUSD pair remains under pressure with support starting at 0.63, followed by 0.6270 and 0.6240. Subsequent floors are eyed at 0.62, backed by 0.6170 and 0.6140. Gains will target interim ceilings at 0.6365, followed by 0.64 and 0.6430. Additional gains will encounter additional resistance at 0.6460, backed by 0.65 and 0.6550.