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US Dollar advances – Manufacturing growth hits 13-Year high

By JOEL HOLMES

The Australian dollar offered little through trade on Monday with markets largely subdued as NSW, QLD and ACT enjoyed an extended Labour Day long weekend. Maintaining a tight 40-point range for much the day the AUD did test key technical supports at 0.7830 and 0.78 following stronger than anticipated U.S macroeconomic data. Breaking below 0.78 for the first time since July the AUD touched intraday lows at 0.7796 and perhaps signalled a wider shift in sentiment. A consolidated move below 0.7830 could signal a break in the recent bull uptrend and as long as a Federal Reserve December rate hike remains in play short term downside supports may be tested opening moves toward 0.7725 and 0.7630. Attentions now turn to the RBA and its monthly rate/policy announcement. With no changes to interest rates expected the focus will be squarely on the accompanying rate statement for impetus and direction. 

The New Zealand dollar edged lower through trade on Monday, testing supports at 0.7190 and 0.72. With little domestic data on hand to drive direction the Kiwi took its cues from offshore impetus and risk appetite flows. Having touched intraday highs at 0.7220 the NZD was forced lower following an uptick in U.S factory orders. Surging to a 13 year high the strong read bolstered expectations of wider improvements in macroeconomic performance and supported calls for a December rate hike. Touching lows at 0.0.7168 the NZD opens this morning buying 0.7187 U.S Cents as attentions turn again turn offshore for direction.

The Great British Pound moved lower through trade on Monday suffering a heavy sell off and touching three week lows. Ongoing Brexit concerns and softer macroeconomic performance have plagued Sterling performance and another poor GDP print Friday, compounded by softer than anticipated manufacturing data Monday, forced the unit back below 1.34 as investors begin to question whether the prophesised November rate hike will cripple the weakened economy.  While a Tory party conference at the weekend highlighted division within the party and failed to deliver a clear path/strategy to Brexit attentions now turn to Construction and Services PMI prints for direction through the week ahead. 

The U.S. Dollar continues its upward trend, rising to its highest levels in a month last week after Fed Chair Janet Yellen continued her stance of a gradual approach to tightening. The CME FedWatch tool shows a 72% of a 25 bps hike in Decembers meeting. The U.S Dollar Index (DXY) hit a high of 93.63 this morning and was 0.57% higher at the time of writing after robust domestic manufacturing data due to stronger orders. Manufacturing activity in the United States rose to a 13-year high in the month of September along with an increase in construction spending. EUR/USD lost ground overnight after a vote in Spain saw Catalans vote 90% to leave Spain which holds 20% of Spain’s GDP. Trading down 0.70% for the day and currently opens at lows of 1.1732 with further downside potential as markets evaluate a constitutional crisis. USD/JPY continues to see strong bid tones after stronger than expected macroeconomic data from the United States and saw an intraday high of 1.1310.