USD strengthens as risk sold in late Asia and early Europe.

Key Movers

The US Dollar Index (DXY) opens higher against a basket of currencies this morning. The catalyst for the move upwards was a last minute deal on the revised NAFTA agreement with Canada, solidifying the US-Mexico-Canada agreement.

The US-Mexico-Canada agreement (USMCA) supported the USD for a good part of the day yesterday. The greenback was also supported by some comments by President Trump; he was quick to claim vindication for his hardline approach to trade negotiations and also added that India had reached out for a trade deal.

In terms of economic data, the US ISM index fell 59.8, slightly below expectations but still implying very good growth in the manufacturing industry. Brent crude oil moved around 2% upwards to hit its highest level since 2014, adding more to the inflation narrative in the US.


The euro came under further pressure against the US dollar on Monday and fell under the 1.1600 handle. Having initially opened during the Asian trade at 1.1617 the euro was sold in the lead up to Eurozone PMI data, in particular Italy’s, which dropped to 50.00, a 25-month low. Data showed that Eurozone manufacturing shifted down another gear at the end of the third quarter, too.


Meanwhile, Italy remains in focus. The spread between Italy and Germany 10-year bond yields has widened to its most in 5 years, which in itself is weighing on risk appetite this morning, and in turn seeing equities sold off throughout Europe. Italy’s budget concerns continue to heap pressure on the single currency, and the pair now looks like it will break below 1.15 before long.


In an unsurprising move last night, the RBA left interest rates on hold and made few changes to its accompanying statement. However, they did remove the reference to a headline inflation forecast of 1.75% and made mention to rising mortgage rates as being a minor issue. It ultimately failed to have an impact on the aussie dollar.

What has had an impact on the AUD/USD is the attitude to risk in Europe this morning. In fact, it started in the Asian session with equities getting off to a rotten start following the public holidays in China and Hong Kong. AUD/USD has since fallen under .72 and opens in London at .7190.


The Canadian dollar was among the best performers in overnight trading, hitting a 4-1/2 month high against the USD. It was of course buoyed by the news that the US and Canada had finally penned new NAFTA deal, as referenced in yesterday’s commentary.

The CAD was also helped by increasing crude oil prices which hit $84.4 per barrel. Concerns over supply in Iran and the Permian Basin seem to be the impetus for the move higher, which helped demand for the currency of the oil-producing Canada.

Moving into Tuesday, the loonie enjoys a quiet day on the economic calendar. Off-shore events will likely dominate.


NZD/USD fell overnight as NZIER QSBO, a business confidence measure, showed that business confidence fell in Q3. It recovered, of sorts, but has since dropped in line with the sell-off in risk. It slipped below .6600 in early European trade and opens this morning at .6585.