The greenback weakened on Wednesday as better-than-expected economic data in China bolstered risk appetite and boosted the Australian dollar. China's economy grew at a steady 6.4 percent pace in the first quarter, defying expectations for a further slowdown, as industrial production surged and consumer demand showed signs of improvement. "Risk sentiment seems to have improved overnight on the back of the strong Chinese data," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
Investors are closely watching Chinese and European economic data for signals that global growth is recovering. The release of Purchasing Managers Indexes (PMIs) for the manufacturing and service sectors in Europe on Thursday will provide the next indication of the strength of the European economy.
Investment inflows into Europe have been improving, which may give the euro a boost against the greenback. The US dollar is also heading into a period of the year when it has traditionally weakened. "We're at the upper end of the range for the dollar and we think seasonal pressures should start to weigh a little bit more on the dollar going forward, generally this is about the time of year when the dollar starts to soften up from a seasonal point of view," said Osborne. The Australian dollar outperformed on the Chinese data. The currency is sensitive to the economic fortunes of China, Australia's biggest trading partner.
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