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Steady progress for US economy

Daily Currency Update

USD - United States DollarThe US dollar has flattened out against most major currencies, and the upcoming US presidential election could add turbulence to the market in the next 60 days.After EURUSD broke above 1.20 on Tuesday for the first time since May 2018, it has dropped to around the 1.18 handle. GBPUSD, which nearly broke 1.35 on September 1, retreated to below 1.33. Last Thursday, USDCAD fell through 1.30 and its since recovered. Its trading at 1.315 this morning.Despite the major selloff last week, the US has been steadily recovering from COVID-19 lockdowns. US Economic activity in the services sector grew in August for the third month in a row, according to the nation’s purchasing and supply executives.The Institute for Supply Management® (ISM®) Services Business Survey Committee, in a statement, said that the Services PMI™ registered 56.9 percent, 1.2 percentage points lower than the July reading of 58.1 percent. This reading represents growth in the services sector for the third straight month and the 125th time in the last 127 months, except for April's and May's contraction. The survey of about 300 purchasing managers is considered a leading indicator of economic health. Businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy.

Key Movers

URGBP continued to tread water around the 1.1250 handle. Brexit headlines re-emerged as parliaments around Europe returned after their summer. Michel Barnier, the European Union’s chief negotiator, was downbeat yesterday on the chances of a deal being done by the end of the year. Barnier stated he was "worried and disappointed" about the slow progress after meeting members of the UK delegation yesterday. There is a full round of further negotiations next week. Barnier has stated that a deal must be done by the end of October to leave time for it to be ratified for the new year.The AUD drifted lower through trade on Wednesday amid weaker than anticipated Q2 GDP data and a sustained USD bear market bounce. Second quarter GDP data showed the economy contracted at its fastest pace on record, plunging 7%, well beyond market estimates at 6%. Analysts had anticipated a sharp adjustment as the country grappled with the effects of COVID-19 imposed lockdowns but the larger than expected decline suggests the RBA will need to do more to fuel the economic recovery with a return to pre-covid levels not expected until at least 2023.

Expected Ranges

  • EUR/USD: 1.179 - 1.185 ▲
  • GBP/USD: 1.324 - 1.335 ▲
  • AUD/USD: 0.726 - 0.733 ▲
  • USD/CAD: 1.304 - 1.315 ▲