Aussie Weakens As Australia's Economic Growth Slows In Second Quarter

The Australian dollar lost ground on Wednesday morning in Asia following a report showed that the nation's economy grew at a slower than expected rate in the three months to June.

Australia's gross domestic product was up a seasonally adjusted 0.6 percent on quarter in the second quarter of 2012, the Australian Bureau of Statistics said today.

That missed forecasts for an increase of 0.8 percent following the upwardly revised gain of 1.4 percent in the first quarter.

On a yearly basis, GDP was up 3.7 percent, matching forecasts but slowing from 4.3 percent in the previous three months.

At the same time, activity in Australia's services sector continued its sharp contraction in August, according to survey reports released by the Australian Industry Group and Commonwealth Bank.

The AIG/Commonwealth Performance of Services Index declined 4.1 percent on month to a reading of 42.4. Readings below 50 indicate a contraction in activity in the sector.

Asian equity markets are trading in negative territory, falling between 0.10 percent to 1.35 percent, ahead of Thursday's European Central Bank meeting and the U.S. non-farm payroll data on Friday.

The European Central Bank President Mario Draghi is widely expected to announce the details of his latest crisis-fighting measures after the ECB Governing Council meeting.

The Australian dollar reached below the key 1.02 level against the US dollar following the GDP data, falling as low as 1.0195, down by more than 0.3 percent from yesterday's closing quote of 1.0227. The bearish bias is likely to continue as the pair is heading towards the next major demand zone around the 0.97 level.

Latest economic reports from the U.S. were not so encouraging, with the U.S. manufacturing activity falling in August at the fastest pace since 2009.

The Institute for Supply Management's index of national factory activity fell to 49.6 in August from 49.8 in July. A reading below 50 indicates contraction in the manufacturing sector.

Also, construction spending unexpectedly dropped 0.9 percent in July, following a 0.4 percent rise in June.

The aussie also reached below the key 80.0 level against the yen, falling as low as 79.91 around 1:10 am ET, its lowest level since July 25. The aussie-yen pair is presently worth 79.95 with 79.50/55 seen as the next likely support level.

Japan's private sector activity decreased for a third consecutive month in August, but the rate of contraction was weaker than in July, a survey report from Markit Economics showed today.

The composite output index, that measures performance of both manufacturing and service sectors, rose modestly to 48.6 in August from 47.4 in July. However, the reading below 50 indicated contraction of the sector.

The Australian dollar extended its 2-week losing streak against its Canadian rival on Wednesday morning in Asia, falling to a fresh 3-month low of 1.0060, down from 1.0085 hit late New York Tuesday.

The aussie-loonie pair is heading towards the next major demand zone near the parity level, well below its key supply zone of 1.0590/1.06 area that hit in early August. The near-term support is seen around the 1.0555/60 level with potential stops can be placed above the 1.01 level.

The Australian dollar lost ground against its Tasman rival, falling as low as 1.2834 around 12:50 am ET. The aussie-kiwi pair is presently worth 1.2838 with 1.28 seen as the next likely support level in the near-term.

The Australian currency also pared its Asian session advance against the euro in late Asian deals Wednesday. The aussie is presently quoted at 1.23 against the euro, down from a session's high of 1.2269. If the aussie weakens further, 1.2340 is seen as the next likely target level.

Looking ahead, services PMI data from the major eurozone economies including Italy, France, Germany and the whole eurozone will be released in the European session.

Final numbers for the U.S. non-farm productivity and labor costs for the second quarter are expected in the New York session.

Bank of Canada is set to announce its interest rate decision at 9:00 am ET.