The Aussie dollar rallied 0.6% to $1.04340 against the US dollar this afternoon following renewed dollar weakness.

AUDUSD traded lower during the early morning session, however, after JPMorgan Chase downgraded their forecasts for US economic growth. In a report released earlier today, JPMorgan Chase said that US GDP will grow by 1% in the fourth quarter, down from an earlier estimate of 2.5%. The bank also expects first-quarter growth in 2012 to be 0.5% instead of 1.5%. ‘Growth in the current quarter looks only moderately softer than our previous projection,’ JPMorgan’s Froli said in today’s note. ‘Global growth has disappointed and foreign growth forecasts have been taken lower.

Risks of a recession are clearly elevated.’ The note added to the view that the global economy was in danger of stalling and pushed traders to increase bets for an interest rate reduction by the RBA. ‘A significant global downturn, particularly one that affected China and commodity prices, is a key risk to Australia and would likely see a substantial cut to the RBA’s cash rate,’ HSBC’s Chief Economist Paul Bloxham wrote in a report today.