The Australian dollar pushed higher during the Asian session with a positive reaction to the GDP data even though it was only marginally above consensus at 0.6%. The Australian currency was also able to avoid selling pressure resulting from emerging-market fears and a decline in copper prices. AUD/USD moved to a peak above 0.9170, the highest for over two weeks.
There was a small downward revision to the final Euro-zone PMI services-sector index with progress hampered by a decline in the Italian reading. There were also important political stresses within Italy as the government remained close to collapse and this did have an impact in curbing Euro sentiment, although the overall market impact was limited.
The US trade deficit was slightly wider than expected with a shortfall of US$39.1bn from US$34.1bn previously as imports recovered from the sharp June decline. Price action was subdued with the Euro and dollar struggling for breakouts.
There was a high degree of caution ahead of key events over the remainder of this week. The ECB will hold its latest council meeting on Thursday and there will also be an important US release with the ADP employment data. The pivotal US payroll data will also be released on Friday which will be extremely important for near-term direction.
In this environment, there was a probing of technical area during the day, but the Euro and dollar were unable to gain any momentum. With the Australian dollar gaining ground and the Canadian dollar resilient, there was a dip in demand for defensive currencies during the New York session. USD/JPY advanced to the 99.65 area while USD/CHF moved towards 0.94, aided by franc losses against the Euro.
For the third day running, the UK economic data was stronger than expected with the services-sector PMI index rising slightly to 60.5 for August from 60.2 previously which was particularly impressive given the sharp increase last month. The headline index was at the highest level since the beginning of 2007 and there was strength in most components which bolstered optimism over the economy.
Sterling again spiked higher following the data and did find increased underlying support as markets continued to speculate over an increase in interest rates earlier than planned by the Bank of England. GBP/USD pushed to highs around 1.5630 before edging lower while EUR/GBP tested support below 0.8450.