After taking fairly heavy losses across the board during yesterday’s trading session as treasury yields reversed course, the United States Dollar is on the front foot this morning and retracing most of yesterday’s slide.
Overview
US equity futures are also set to open higher this morning, and treasury yields have bounced a bit higher this morning after yesterday’s spike downward. The 10-year yield’s move above the key psychological threshold of 5% immediately prompted a swing lower, driving USD down in tandem yesterday after a few major traders called the move outsized in all but name and said they were covering their bets against Treasuries.
In addition to this wildly swinging bond market, PMI releases from around the world are also giving USD some comparative strength. The Eurozone’s composite survey came in both below expectations and firmly in negative territory. Coupled with Christine Lagarde’s call this morning that emphasized the downside risks to the region’s economy, even going so far as to say the Eurozone is likely to be in stagnation territory for the next few months, Euro prices are retreating back from their monthly highs. Similarly, UK PMI also posted a figure below expectations. Of note is the manufacturing reading in particular, coming in at 45.2 – a definite contraction. US PMIs are due out at 9:45 eastern this morning, and are expected to show that the economy is not contracting. Each PMI reading out of the US for the last 4 cycles has prompted a dollar rally, and today looks to be no different.
Though there is quite a bit of volatility throughout the market this month, the US economy still seems to be holding its own better than its peers, keeping the Dollar better than its year-to-date lows over the summer.
What to Watch Today…
- Bank of Canada Rate Decision, Wednesday 10 AM
- European Central Bank Rate Decision, Thursday 8:15 AM
- US GDP Q3, Thursday 8:30AM
- US PCE, Friday 8:30 AM
- Monex USA Online is always open
CAD ⇓
The Loonie quietly slid back against USD 0.15% this morning as traders reposition ahead of the Bank of Canada’s meeting tomorrow morning. The BoC is quite unlikely to raise interest rates, and it seems as if this hiking cycle may be finished for our neighbors to the north. As the US is still flirting with the idea of a final hike this year, CAD is sitting today weaker than its one-month moving average.
AUD ⇑
The Australian Dollar is one of few winners against USD this morning on the heels of what markets perceived as hawkish comments from RBA Governor Michele Bullock. Though the Reserve Bank of Australia has raised its key interest rates by less than its counterpart in the Reserve Bank of New Zealand, Bullock highlighted that the situations for the two nations were different and it appears that Australia is less likely to enter a technical recession than both New Zealand and many of its G10 peers, giving Aussie a boost of 0.4% against USD. Any upside risk to oil prices from geopolitical strife is likely to continue to give AUD some strength.
