Home Daily Commentaries USD stalls on lower stock open

USD stalls on lower stock open

Wednesday 5 October, 2022

Daily Currency Update

The trading rally that we saw to start the fourth quarter stalled this morning. Stocks and most commodities were down in early trading. It follows several Federal Reserve governors’ comments yesterday that reinforced the Fed’s hawkish tones from their last announcement. The USD index (DXY) was up this morning with the US gaining against most majors. On the data front, Today’s ISM Non-Manufacturing survey is expected to come in at a market positive 56. Markets will be watching this data as it shows the confidence in service industries, which have seen some job losses as of late. Later this morning, we have the weekly oil inventories from Cushing OK. A larger than expected draw down could combine with the announcement this morning that OPEC+ is set to cut production by 2 Million barrels a day to help the WTI number up to $90 a barrel.

Key Movers

The Euro has followed along with the basket of major currencies that have lost ground to the USD this morning. The pair has remained in a range though and it’s likely to take something significant to break it out. Like most other major currencies, the Pound has surrendered most of the gains that it made in the last 2 days. On the data front, the UK Services PMI was better than expected today, showing the confidence index reaching the benchmark of 50 on the scale. The Yen continues to underperform the USD after the Bank of Japan interceded into currency markets last week. Data wise this morning though, confidence amongst Japanese purchasing managers came back over the all-important 50 mark. This is largely in response to the expectation that a lower Yen should lend an assist to Japanese exports. One day after Australia’s central bank disappointed with a 25-point hike, the Royal Bank of New Zealand matched expectations with a 50-point hike. This brings their overnight rate up to 3.5%. The Canadian dollar is another currency giving up yesterday’s gains. The Canadian trade surplus unexpectedly dropped to $1.5B in August, missing the consensus of $3.45B to the good. Mostly though, this is the general strength of the USD\. With the announcement from OPEC+ today that production will be cut by up to 2 million barrels a day, there is potential for higher oil prices. This is something that could stem further weakness for the CAD.

Expected Ranges

  • EUR/USD: 0.9866 - 0.9998 ▼
  • GBP/USD: 1.1260 - 1.1487 ▼
  • AUD/USD: 0.6422 - 0.6523 ▼
  • USD/CAD: 1.3505 - 1.3674 ▲