Currency Update - Thursday 3rd October 2019
AUD
The Aussie Dollar is doggedly holding on, having recovered from as second tough overnight session in a row. The recovery came from weak US ADP Employment Change and positive sentiment surrounding the trade war. However the gains were limited and the Aussie Dollar is still fairly weak considering the broader sentiment playing against AUD. US recession fears aren’t helping at the minute with the market once again turning against risk. We’ve got our August trade balance coming out today and then we’re onto the US ISM PMI data at tonight.
USD
Fears over a recession in the US have dominated the headlines and Wall Street is in a sea of red. Tuesday night's soft ISM Manufacturing PMI print contineud to resonate with markets and stoked the fears of a slowing US economy. US equity markets had their worst day in over a month with both the Dow Jones and S&P 500 falling almost 2%. The shift in risk sentiment helped push bonds higher and 2 year yields are back up past 1.5%. A soft USD saw JPY and EUR both making gains and helped a beleaguered Aussie Dollar rebound. Last night's US ADP Employment numbers for September showed that 135k jobs were added, down from a negatively revised 157k and just falling short of expectations of 140k. Tonight we have ISM Non-Manufacturing PMI, which has the potential to dissapoint if it leads on from Tuesday's related figures.
EUR
Euro has made some gains against the USD following the fears over a US recession despite their own data coming out less than inspiring. The German Institute cut 2020 growth forecasts from 1.8% to a shocking 1.1%. With fears over a US recession European equities opened poorly following widespread losses in Asia. There is something of an absence of major news that is keeping currency movements subdued but continue to expect a risk off environment.
GBP
The UK has zeroed in on Boris Johnson’s speech in Manchester as details on the Brexit plan was leaked to a newspaper. The DUP sources were said to be happy with the new plan though Irish Senator Richards said the proposals “won’t fly”. The speech itself consisted of Johnson criticising Parliament over the Brexit impasse and reasserting that the UK will be leaving the EU on October 31st. He reassured Irish members that the peace process in Ireland will be respected and no checks at or near the Irish border will be instituted. Without much substance to the speech, GBP made some gains on the USD, taking advantage of a softer greenback amid recession fears.
NZD
The Kiwi dollar is benefitting from US weakness, the Bird remains in recovery mode, bouncing off fresh 4-year lows yesterday against USD. AUD also gave back some of its recent gains against NZD, probably a hangover from Tuesday's interest rate cut. The Kiwi economic calendar is sparse, so NZD to trade on risk sentiment and US data.