Daily Currency Update

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Services sector up, but the dollar is down

USD - United States Dollar

Economic activity in the services sector grew in September for the fourth month in a row and beat the expected forecast. Despite the upbeat news, demand for the US dollar opened the week down.

The Services ISM Report on Business, a survey of the nation’s purchasing and supply executives, registered 57.8%, only a 0.9% increase from August. Still, it represents growth in the services sector.

Meanwhile, demand for the US dollar fell this morning. The US Dollar Index was down a half percent and its lowest level since September 21.

Demand changed hands from the dollar to the euro. The EURUSD is up two thirds of a percent this morning and approached 1.18. Its trading at 1.1785 at the time of writing.

Key Movers

Europe enforced stricter rules in Madrid and Paris. The cities implemented 11pm curfews to slow the virus spread. With such cultural and economic significance, it is likely this’ll hurt GDP figures later this month and could knock the euro in the short term. We have 3 scheduled speeches for European Central Bank President Christine Lagarde on Tuesday and Wednesday this week. She will likely give further clues into central bank’s euro and inflation monitoring.

As is once again the case, individual data releases from the UK are doing little to dictate the pound’s direction. It is likely that Bank of England Governor Andrew Bailey’s speech on Thursday will provide some talking points. At present, we are seeing conflicting views released from the monetary policy committee, with some ruling out the idea of negative interest rates, and others suggesting they are an available policy option on demand. Talk of cutting interest rates into negative territory has weighed on the pound in the last few months and will continue to do so if Bailey refuses to rule them out. Other than Bailey’s address, there is no real data releases scheduled for this week.

The Australian dollar traded within a 50-pip range on Friday and with a risk-off end to the week the AUDUSD closed at 0.7160 vs the US Dollar. During the Asian session, the pair initially pulled back and touched an intraday low of 0.7131. This coincided with a drop in Australia’s retail sales numbers and President Donald Trump’s COVID-19 results. Australia's consumer spending, as represented by retail sales, fell 4% vs an expected contraction of 4.2%, this follows a rise of 3.2% in July. The decline in consumer spending validates the Reserve Bank of Australia's easing of monetary policy. The central bank is now expected to cut rates to a fresh record low of 0.10% in November.

Expected Ranges

EUR/USD: 1.171 - 1.178 ▼

GBP/USD: 1.290 - 1.298 ▼

AUD/USD: 0.716 - 0.719 ▲

USD/CAD: 1.326 - 1.330 ▼