Forex headlines for September 2, 2014:
- August 2014 US ISM manufacturing PMI 59.0 vs 56.8 exp
- August 2014 US Markit manufacturing PMI final 57.9 vs 58.0 exp
- Canadian RBC Aug manufacturing PMI 54.8 vs 54.3 prior
- New Zealand falls to lowest since February as Fonterra price index falls 6%
- US July construction spending +1.8% vs +1.0% expected
- September US IBD/TIPP economic optimism 45.2 vs 45.5 expected
- European Commission issues Russian sanctions wish list
- Ukraine army demolishes Luhansk airport in retreat
- IMF says Ukraine may need $19bn in additional financing by end of 2015
- Odds surge for Scotland pro-independence vote after poll
- ECB’s Klaas Knot says transparency is key for ECB bank assessment
- Gold down $20 to $1266
- S&P 500 down 1 point to 2002
- US 10-year note yields up 7.5 bps to 2.41%
- CHF leads, GBP lags
The story today is about this simple: The ISM manufacturing index is at a 10-year high and the Fed still has interest rates at zero and is printing $25 billion per month. It’s a dichotomy that just can’t last and that’s why money is flooding into US dollars. The primary victims to start the month were the yen and pound while the euro was able to hang tough.
The vultures are starting to circle USD/JPY. The Japanese economy is starting to skid and the US is beginning to roll. The market is still digesting one tax hike and another one is coming. Labor cash earnings were strong in July but no one sees inflation in Japan. The break of 105.00 up to 105.21 is big news and a few traders are starting to catch the scent of 110.00. Not only was today’s 75-pip rally impressive, the way we’ve held 105 is just as important. Last at 105.11.
In the UK, the Scottish referendum is suddenly on the front pages as the Yes vote surges. If you’re trading this pair, polls are more important than Carney until Sept 18. It was a total massacre today and a one way move down to 1.6477 from 1.6600.
The dollar flex its muscles on the commodity crosses in a steady move. USD/CAD is unwinding last week’s huge sales and up to 1.0929. AUD/USD is down to 0.9270 but still well-within the mid-2014 range.
The big jolt in the bloc was in the kiwi after a soft Fonterra auction. From 0.8335 it was a quick move lower that momentarily stopped at the Aug low of 0.8311 but then that broke to 0.8292. Quietly, the pair has mounted a bit of an afternoon comeback in a sign (premature perhaps?) that the washout is over for now.
Gold and oil both took beatings that were nearly non-stop.
