Yesterday the greenback was sold across the board, with the Australian dollar leading the charge, gaining a whole 1% on the day. Participants are now beginning to consider the dollar’s prospects for 2020 and it’s not filling them with a huge amount of confidence. Trade talks with China have stalled, the Fed will likely lower interest rates further, the economy is weakening and while this is happening, the Federal Reserve are continuing to expand their balance sheet via daily operations in the bond markets.
Behind the Aussie dollar yesterday was the euro which gained almost 1 cent against the buck, reaching just shy of the $1.11 mark. In the context of the EURUSD’s recent range, this is a considerable move and one which could suggest further upward pressure. It’s undeniable the eurozone is having a tough time at the moment but judging by yesterday’s European PMIs the region may have already bottomed out and is now staging a recovery of some sort. On the other hand, Monday’s US manufacturing ISM PMI painted a gloomy picture with the nation pushing further into contractionary territory. US/China trade tensions beginning to bite harder? Either way, this potential divergence between the two economic regions could support the theme of a stronger EURUSD.
Today’s economic calendar is light. Many will focus on the overnight decision by the Reserve Bank of Australia to keep rates on hold at 0.75% which has produced an AUD rally. In addition, overnight tonight sees some more Chinese PMIs in the form of services.
Written by Viv Savani. 8:40am, December 3rd 2019
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