Risk appetite was given a boost by uplifting data from down under.

Australia surprised the markets by reporting that its economy grew at the fastest pace in three years. GDP advanced to 1.2 per cent in the second quarter from 0.5 per cent, beating analysts forecast for 0.9 per cent growth. The rise was largely attributed to China’s demand for iron ore as exports climbed 5.6 per cent to contribute 1.1 percentage points to GDP. Another key factor was an increase in household spending by 1.6% which added 0.9 percentage points to the figure. China added to the improving sentiment as August manufacturing PMI printed higher than the anticipated 51.5 rising to 51.7 from the prior 51.2.

The commodity centric economy of Australia is closely tied to growth in China as China demands raw materials provided by its nearby trade partner. The positive economic data also lends support to further rate hikes from the Reserve Bank of Australia. AU$/US$ surged from session lows around 89.10 to highs of near 0.9060.

Asian stock markets rallied across the board overnight on the improving risk sentiment with the Nikkei 225 gaining roughly 1.17 per cent. European bourses are currently following higher.
 
The increase in risk appetite sent the US dollar lower with €/US$ currently trading just above 1.2800 having rallied from session lows around 1.2665. The dollar is also being sold against the yen as US$/Yen approaches its 15-year lows and is currently trading a tad under 84.00. £/US$, which took quite a plunge yesterday on fiscal concerns and dipped following this morning’s weak August manufacturing PMI (54.3 against expected 57.0 and prior 56.9) has rebounded from lows around 1.5335 to current levels around 1.5400 on a softer greenback.