USD edges lower with equity futures again in the red

Key Movers

The US Dollar was largely out of the spotlight Monday. Its’ index against a basket of currencies edged very marginally higher to end in New York at 94.20 but after a dull session in Asia overnight it has moved steadily lower; mirroring the strength of the Single European Currency which is back to USD1.17 for the first time in almost three weeks.

The good news for the USD yesterday was that early weakness in equity index futures was reversed and a 10-point loss for the S+P 500 turned into a net 5 point gain by the close. “Buy the Dip” was alive and well. The problem is that the market is going to have to repeat that feat today, albeit on a smaller scale. Futures markets are indicating a loss of around 3 points before the opening bell. On the US economic data front, the latest NFIB survey of small businesses was pretty upbeat. It noted, “The Index of Small Business Optimism gained 0.8 points to 103.8 in October, maintaining a streak of robust readings. Four of the 10 Index components posted a gain, 5 declined and one was unchanged.

Labor market indicators point to continued good jobs reports and job openings surged to record territory”. Will it be enough, though, to help the USD and stock market reverse their early losses?


From a low point last Tuesday of USD1.1561, the EUR has moved steadily and persistently higher. It ended the week at 1.6662, reached a high Monday of 1.1672 and in overnight trading has surged to 1.1723; its best level since the day of the ECB meeting back on October 26th. Against the Canadian Dollar, the EUR finished last week at 1.4792. It touched 1.4854 Monday and this morning opens in North America at 1.4921, having been as high as 1.4935 in the European session.

The reason for the EUR’s strength today is yet another set of better than expected economic numbers. They’ll be of little comfort to Italian soccer fans who last night saw their team fail to qualify for the World Cup finals for the first time since 1958, but GDP of 0.5% q/q pushed the annual rate of growth in Italy up to a 6-year high of 1.8%. Germany grew +0.8% in Q3 - driven by public consumption, investment and net exports - and some of its back data were also revised higher.

Taken together with a solid German ZEW Survey (a survey of investment professionals rather than industrialists) the near-term outlook for the EUR looks pretty good. For your author, it’s certainly a relief not to see it once again nailed to a USD1.16 big figure.


The British Pound is again a bit weaker this morning, driven by a combination of both politics and economics. GBP/USD recovered off yesterday’s London low of 1.3068 to finish in North America around 1.3116 whilst GBP/CAD rallied from its 3-week low of 1.6598 to end around 1.6700.

This morning, the GBP/USD rate is down at 1.3111 with GBP/CAD at 1.6685. We won’t get in to the boring details of the latest twists and turns of the Brexit plot here, but suffice to say the leaders of the UK Government continue to fight against each other like cats in a sack whilst the EU withdrawal bill returns to the House of Commons for debate this afternoon. Meantime, official statistics this morning show that CPI inflation was steady at 3.0% y/y in October rather than the 3.1-3.2% consensus of analysts’ expectations. This is important for several reasons. It continues the squeeze on real earnings (wages are growing only around 2% y/y) but it calls into question both the BoE’s recent decision to raise interest rates and undermines the arguments for any further tightening of monetary policy.

It would be a very brave trader or investor to play GBP from the long side today and the British Pound is unlikely to rally much until wages show signs of picking up or the political situation improves.


The Aussie Dollar hit a low point overnight of USD0.7611 but then recovered to 0.7634 and traded sideways throughout the European morning to open today at 0.7631. The AUD/CAD cross rate hit a fresh cycle low of 0.9694 in early Sydney trading but then rose to a best level of 0.9729 in Europe and opens in North America at 0.9712.

The main reason for the AUD recovery is a very strong monthly business survey from the NAB; one of Australia’s ‘Big Four’ banks. The widely-watched “business conditions” index reached an all-time high of +21 in October; a huge 7-point jump from September’s +14. The Survey has been running for 20 years and this measure has never been so strong. Unusually, however, the “business confidence” index was unchanged at +8 in October; only marginally above its long-term average. It’s a little strange – to say the least – to see conditions improve so much but for there to be so little lift to confidence.

Nevertheless, the Aussie has found some welcome support after threatening to break lower and we’ll now look forward to official data on employment and wages later this week to see if its gains can be sustained.


Sometimes the NZD/USD exchange rate moves because of what’s happening in New Zealand. Sometimes, it’s because of developments in the United States. Overnight, however, it has moved because of what happened on the AUD/NZD cross rate. Immediately after the New Zealand elections on September 23rd, AUD/NZD stood at 1.0835.

With uncertainty over the new government and its policies, the pair reached a closing high of 1.1267 on October 24th. Since then it has slipped gradually lower as the fears of a big change to the RBNZ’s mandate didn’t materialize and economic data showed the new Administration inheriting a pretty strong New Zealand economy. AUD/NZD began to unwind some of its gains and last Wednesday reached a closing low of 1.1037 as investors bought back their Kiwi Dollars and some analysts began to recommend outright short positions in the cross.

With the very strong headlines in the NAB Survey overnight, these positions have been cut and AUD/NZD has surged from 1.1040 all the way up to a best level overnight of 1.1130. The NZD/USD pair suffered in this process, with the rate falling almost half a cent from a New York close around 0.6902 to open in London this morning at 0.6856. It has subsequently recovered a touch to 0.6870 with NZD/CAD down almost half a cent from yesterday’s North American close to open this morning at 0.8747.