- US Dollar continues to remain under pressure
- RBA cuts interest rate to 1.50%
Yesterday the Dollar weakened as US indices closed mixed with the NASDAQ rising 0.4%, but the Dow and S & P also fell 0.1% with the energy sector being the largest drag as oil fell deeper into bear market territory. US crude futures closed at $40.06 after briefly dipping below $40 a barrel amid the usual oversupply concerns. In terms of data, the Dollar remained under pressure as July ISM manufacturing eased to 52.6 against an expectation of 53.0. A couple of Fed members were on the wires warning that it was premature to rule out a September hike which helped keep the Dollar trading within recent ranges.
Overnight the Australian Dollar weakened as the Reserve Bank of Australia cut rates by 25 basis points to 1.5%. They cited lower inflation and leading indicators suggesting that the weaker environment was likely to prove persistent. The move was pretty much priced in and after the knee jerk sell off the Australian Dollar managed to rally again. Markets will surely begin to price in further cuts so for now any rally in the currency is likely to be limited.
This morning’s data from the UK was poor as it was reported that output from UK construction industry was still in contraction territory in July. Construction PMI dropped to 45.9 from 46.0 in June well below the 50 level, reflecting a slowdown in the sector. The uncertainty after the EU referendum was the main factor that weighed on business activity particularly within the commercial sector. The Pound retraced from recent highs as attention now turns to the inflation report and the Bank of England rate setting a meeting on Thursday. Most economists are expecting some form of action form the bank as they attempt to stimulate the UK economy. Having been surprised by the vote to leave interest rates unchanged last month positions are not quite as large as normal so we could see an aggressive move lower if and when a cut is confirmed. For now though expect the Pound to remain on a holding pattern until Thursday.
Today's Major Economic Releases
||UK: Construction PMI
||EU: PPI m/m
||US: Core PCE price index m/m
||Canada: RBC manufacturing PMI
FX Research by Ricky Nelson
Daily Currency Analysis with William Busby
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