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Antipodeans surge whilst USD comes back under threat

Summary:

  • AUD and NZD are both sitting on substantial daily gains
  • RBA meeting and GDT auction contribute to the bid
  • USD back under pressure after Brainard, Trump tweet and poor factory data
  • Cryptocurrencies are attempting to recover after recent declines
  • UK services PMI hits 11-month low

Antipodean currencies are enjoying their strongest rally in quite some time today with the Australian dollar rising after the RBA decided to keep rates on hold. The New Zealand dollar’s rise could be attributed to an increase in the fortnightly GDT auction but if truth be told the currency was already firmly higher ahead of the release. It’s a similar story with the Aussie, with the move also seemingly not down solely to the RBA meeting which could be described overall as fairly neutral.  

The US dollar is coming back under some pressure today, with some selling seen after Trump tweeted on the latest North Korea situation. The US president revealed that the US will allow Japan and South Korea to buy a "substantially increased amount of highly sophisticated military equipment" from them. It is clear that Trump is in no mood to back down following the recent escalation of North Korean tensions and it is unlikely this is the last we’ll here on the matter. 

The tweet came not long before the only economic release of note this afternoon, with US factory orders falling to their lowest level in 3 years. Before both of these headwinds appeared for the buck it was already drifting lower following comments from Fed member Brainard. Even though Brainard is a renowned dove her talk in New York which stated her belief that it may be prudent to raise rates more gradually than the median forecast and that inflation was well short of objective had seen some selling in the greenback. 

After a hefty sell-off seen at the beginning of the week, all virtual currencies are trying to recoup their losses. Let us recall that the rout came in the aftermath of the Chinese central bank’s report where it called initial coin offerings (ICOs) illegal and whilst there is some signs of buying in the markets, all 5 instruments remain in the red on the day. 

 UK services PMI for August came in at 53.2, indicating a slower than expected rate of growth and falling to its lowest level since September. According to IHS Markit, the latest survey highlighted renewed pressures on operating capacity across the service economy. That issue could be reflected by the steepest rise in backlogs of work since July 2015. On the other hand, the rate of job creation accelerated for the third month running to its strongest pace since the start of 2016. The pound showed no major reaction to the release, with losses seen against the Antipodean pairs but gains made against the USD and EUR. 

Looking ahead there’s Australian GDP due out overnight before the second of three major central bank rate decisions tomorrow at 3pm, where the Bank of Canada is expected to keep rates on hold at 0.75%. 

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