USD pares back initial weakness, bolstered by positive sentiment, while commodity currencies strengthen on the back of a pickup in energy prices
The week has kicked off in line with last week’s close as the USD continued to weaken in the aftermath of the US nonfarm payroll report on Friday, before the USD went on to retrace losses as US participants came to market. The USD saw initial weakness as lower than expected job numbers on Friday suggested that US rates would remain lower for longer, while GBP underperformed on the back of the lowest UK services PMI since April 2013 (53.3 vs. Exp. 56.0), as EUR shrugged off generally lower services and composite PMIs from the Eurozone.
However, the European afternoon saw USD claw back its losses to end the day relatively flat despite misses on expectations on the US services and composite PMIs as well as the labor market conditions index change. The greenback’s retracement of losses came in tandem with an unwind of safe haven flows in the likes of JPY and EUR as sentiment improved, with global equities spending the day in the green amid the aforementioned belief that rates will remain lower for longer.
Elsewhere, upside in commodities bolstered commodity currencies today with the likes of AUD, NZD and CAD all spending the majority of the session in the green ahead of key risk events. The notable event in Australia this week is the RBA rate decision scheduled for tomorrow, although all surveyed analysts expect rates to be kept on hold, while traders of NZD will be looking out for tomorrow’s GlobalDairyTrade auction. Finally, the Canadian General Election is set to take place on the 19th October 2015, with polls suggesting that it is currently a three-way tie for power between the Conservative Party (incumbent), New Democratic Party and Liberal Party, with none of the parties able to establish a clear lead in polls.
Looking ahead, as well as the RBA rate decision and GDT auction, tomorrow sees German factory orders, US trade balance, IBD/TIPP economic optimism, API crude oil inventories and comments from ECB's Visco and Draghi and Fed's George and Williams.