Dollar retreated broadly overnight after weaker than expected manufacturing data. The ISM manufacturing index dropped to 56.6 in September versus expectation of 58.5. It should also be noted that the employment component dropped rather sharply from 58.1 to 54.6. The ADP employment report was solid though, showing 213k growth in private sector jobs in September versus expectation of 204k. The greenback will need look into the non-farm payroll report to be released tomorrow for the inspiration for further rally. Before that, dollar would likely stay soft in consolidations.
Aussie also recovers strongly today. Trade deficit narrowed to AUD -0.79b in August versus expectation of AUD -0.78b. Exports dropped -2% to AUD 26.37b while imports dropped even more by -3% to AUD 27.16b. Building approvals rose 3.0% mom in August versus expectation of 1.0% mom. AUD/USD just drew strong support from 2014 low of 0.8659 and recovered. A short term bottom is likely formed there. As mentioned in our weekly report, we're short in AUD/USD but we have closed this short position first.
Euro recovers mildly against dollar today as markets await ECB rate decision and press conference. The ECB announced in September that it would start purchasing asset-backed securities and covered bonds in October, aiming at increasing liquidity to the financial system and stimulate growth. With interest rates now virtually at zero, President Draghi has ruled out further rate cut. Meanwhile, the disappointing response to the first TLTRO has suggested that the asset purchase scheme has to be significant so as to restoring the ECB's balance sheet to early 2012 levels. Last month, the ECB unveiled the ABS purchases plan, noting its role in "facilitating new credit flows to the economy". The portfolio would contain "a broad portfolio of simple and transparent asset-backed securities (ABSs) with underlying assets consisting of claims against the euro area non-financial private sector". At the same time, it would also embark a new covered bond purchase program (CBPP3), buying "a broad portfolio of euro-denominated covered bonds issued by MFIs" domiciled in the Eurozone.
Elsewhere, UK will release construction PMI, Eurozone will release PPI. US will release Challenger job report, jobless claims and factory orders.