European session review: AUD weakens, as extension of lockdown restrictions in Australia's Victoria state outweighed the country's better-than-expected Q1 GDP data

AUD fell against most of its major rivals in the European session on Wednesday, as stronger than expected Q1 GDP data from Australia were overshadowed by reports that the Australian state of Victoria extended its 7-day lockdown. 

The government of the state of Victoria, Australia's second-most-populous state, announced on Wednesday it decided to extend a COVID-19 lockdown in state capital Melbourne for another week in a bid to contain the latest virus outbreak. Meanwhile, the restrictions in regional Victoria will ease from midnight on Thursday. "I know this is not the news that everybody wants to hear but given the cases we have... the government had no choice," noted the Victorian acting premier James Merlino. "If we don't do this [lockdown], this thing will get away. This variant of concern will become uncontrollable and people will die." There were six new coronavirus cases reported on Wednesday, taking the cluster to 60.

The announcement of the extension of the lockdown by the Victorian government offset Australia's upbeat Q1 GDP data. The Australian Bureau of Statistics (ABS) reported that Australia's GDP grew 1.8 percent q-o-q in the first three months of 2021, following an upwardly revised 3.2 percent q-o-q growth in the previous three-month period. This marked the third straight quarter of expansion. Economists had forecast a 1.5 percent q-o-q advance. On a yearly basis, GDP rose 1.1 percent, above pre-pandemic levels, after a downwardly revised 1 percent decline in the fourth quarter of 2020. Economists had expected a 0.6 percent gain.