Euro and Pound Under Pressure, Aussie Drama

The US dollar stumbled but quickly recovered after a sharp downward revision to first quarter GDP. Commodity currencies were strong performers while EUR and GBP lagged. The Asian calendar is light but a surprise twist in Australian politics has grabbed the headlines.

Economists weren't expecting any surprises in the second revisions to first quarter GDP but growth was slashed to 1.8% from 2.4%. The change was a result of a decline in personal consumption to 2.6% from 3.4% and a revision in business investment to 0.4% from 2.2%.

Fed forecasts for 2.45% full-year growth were already on shaky ground (the consensus is 1.9%) and were dealt a heavy blow. The initial reaction was to sell the dollar but the dip buyers were poised.

Fed officials continued to sooth market nerves with Kocherlakota saying initial moves were 'outsized' and Lacker warning the Fed is not 'anywhere near' trimming its balance sheet.

The euro fell to a three-week low of 1.2986 after it broke a cluster of support including the 55, 100 and 200-dma moving averages. It was helped along by dovish comments from Draghi, Noyer and Mersch.

The calendar is relatively light with two minor releases at 0230 GMT. The first is Chinese industrial profits for May, following a 11.4% y/y rise in April. Second, Australia releases May job vacancies numbers and they're expected to drop 10.1%.

The main focus is the ouster of Australian PM Gillard by former PM Rudd. An election was likely in Sept/Oct but could now move up to August. The Aussie came under some pressure on the news but rebounded on better risk sentiment. Rudd warned that the Chinese resource boom is over.