The spike in the Aussie dollar was driven by the trade deficit of $1.36 billion, which was smaller than the forecast $1.77 billion and down from June's deficit of $1.56 billion.

The spike in the Aussie dollar was driven by the trade deficit of $1.36 billion, which was smaller than the forecast $1.77 billion and down from June's deficit of $1.56 billion. Photo: Louie Douvis

The Australian dollar jumped to the highest in a week on the back of better than expected local trade balance figures.

After a strong morning trade around US93.50¢, the local currency reached US93.65¢ on the release of the July trade data at 11.30am and continued trade above the US93.50¢ mark.

The local currency appears to have fully recovered from the dollar slump by half a cent on Tuesday which saw the Australian dollar dip below US93¢.

The spike in the Aussie dollar was driven by the trade deficit of $1.36 billion, which was smaller than the forecast $1.77 billion and down from June's deficit of $1.56 billion.

Retail sales growth in July also remained in line with market expectations, coming in at 0.4 per cent.

"It shows the support for the Australian dollar is still very good," Commonwealth Bank of Australia chief currency strategist Richard Grace said.

CBA expected the local currency to reach US94¢ by the end of 2014, which is higher than the market consensus.

Mr Grace said the Australian dollar was likely to be tested further this week as it faces the European Central Bank press conference later on Thursday and the US payroll data release on Friday.

"It will probably get whipped around a bit," he said.

 More to come