USD Gains on ISM Data, GBP Slides on Hard Brexit Fears, AUD Up After RBA

JFD Brokers
10 min readFeb 4, 2020

The greenback traded higher against most of the other G10s, perhaps due to the ISM manufacturing PMI surprisingly signaling expansion. The big loser was the pound, which came under selling pressure on disagreement between the EU and the UK with regards to whether the UK should abide to EU rules. The big winner was the Aussie, which received a boost after the RBA adopted once again a less-dovish-than-expected language.

ISM Manuf. PMI Signals Expansion, Pound Slides on EU-UK Disagreement

The dollar traded higher against most of the other G10 currencies on Monday and during the Asian morning Tuesday. It gained the most against GBP, NOK and CAD in that order, while it underperformed only versus AUD. The greenback was found virtually unchanged against NZD and SEK.

The dollar’s strength may be owed to the better than expected ISM manufacturing PMI for January. Expectations were for the index to increase somewhat, but to stay stuck within the contractionary territory for the sixth straight month. Instead, it rose to 50.9 from 47.8, surprisingly exiting the below-50 zone, and thereby easing further concerns with regards to the US economy. Combined with this, a decent employment report on Friday may encourage market participants to push back the timing of when they expect the Fed to proceed with another rate decrease. Currently, according to the Fed funds futures, investors are still fully pricing in such an action to be delivered in July.

The surprise in the ISM may have been a boost for the US equity indices as well, all three of which closed in positive territory, aided also by gains in Amazon, Apple and Nike. That said, US indices were not the only ones closing in positive territory. EU bourses rebounded as well, perhaps after the PBoC decided to cut rates early Monday, and also to inject liquidity in order to support economic activity in light of the uncertainty surrounding the coronavirus. The improved investor morale rolled over into the Asian morning today as well, with Japan’s Nikkei 225 gaining 0.41%, and China’s…

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