The first half of today’s session was “risk-on” for FX markets, with the safe-have Swiss Franc, Sterling and in particular the Euro weakening against the dollar while the more risk-sensitive Australian Dollar made gains. But AUD/USD which had risen to 0.692 has fallen back below 0.69 as markets assess whether the outlook for more risk-sensitive currencies has genuinely improved.
US and Chinese officials have reportedly made progress in trade negotiations, with talk that the US could cancel tariffs on $112bn of Chinese imports. This buoyed the Australian Dollar in early trading, as did comments by RBA Governor Lowe in the wake of today’s policy meeting suggesting that the RBA would be on hold for the foreseeable future. A better-than-expected US ISM non-manufacturing PMI print for October of 54.7 – up from 52.6 in September and far ahead of the consensus forecast of 53.5 – added to the buoyant mood in afternoon trading. But the Australian Dollar was unable to hold onto its gains with markets still pricing in a chance of a further RBA rate cut in coming months.
The GBP/USD cross is back below 1.29, with Sterling hit by both weak BRC retail sales data for October and another lacklustre composite PMI print. The composite PMI output index, which mimics UK economic activity, rose to only 49.5 from 48.8 in September, remaining below 50 (indicating contracting economic activity) for the third consecutive month. But GBP/EUR still managed to climb above 1.16 for the first time in 10 days, with markets clearly not convinced that the ECB, now under President Lagarde, can reflate the Eurozone.
