3 November, 2015
FX News Today
The RBA left rates unchanged, which pushed the AUD up across the board, but that didn’t deter stock markets, which focused on the fact that the RBA still kept the door open for further easing.
The U.S. ISM slipped to a 50.1 low, the October ISM is at a new two year low of 50.1, with a drop in the employment gauge to a 47.6 six year low that reinforced the pattern of declining producer sentiment.
The U.S. construction spending report beat estimates, with a 0.6% September rise after boosts in the July and August levels, though the surprise included big boosts in the home improvement residual that doesn’t enter GDP calculations, and the remaining construction data signaled downside risk for the next Q3 GDP revision.
Canada RBC manufacturing PMI fell to 48.0, in October from 48.6 in September. The decline puts the index further below the previous multi-year low of 48.7 seen in February, leaving the weakest reading in this indicator’s short history going back to late 2010.
U.K. manufacturing PMI jumped to 55.5, in October from 51.8 in September. This was a much stronger than expected reading and in fact the highest since June last year.
Gold slipped to nearly one-month lows, now trading around $1,1137/ounce, after touching $1,132,66 overnight. The market continues to fret over last week’s FOMC statement, where fears of a December rate hike have weighed heavily on gold prices.
Crude oil prices declined from two week highs, following poor manufacturing PMI readings out of China, which suggest ongoing contraction in manufacturing activity in the world’s second largest oil consuming countries.
Main Macro Events Today
• AUD RBA Interest Rate Decision: RBA held rates steady at 2.00%, matching expectations. The statement was similar to last month, lacking clear guidance and sticking to a cautiously dovish tone that justifies prevailing policy settings while reminding that they have room to cut further if needed. They also maintained the shift to less-negative language about the Australian dollar (first seen in August) remarking that the currency was “adjusting to the significant declines in key commodity prices” versus the previous guidance that “further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices.”
• GBP PMI Construction: The forecast calls for a 58.8 reading down from the last 59.9 number.
• ECB Presidents Draghi’s Speech: Eurozone markets will look for comments from ECB’s Draghi for a clarification of the policy stance after the president seemed to dampen easing hopes in comments from last weekend.
Senior Currency Strategist
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