AUD Explodes Overnight

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USD Down on Manufacturing Miss

The US dollar has been under pressure over early trading on Tuesday as the reaction from yesterday’s data miss continues. The US ISM Manufacturing print for November came in below expectations at 48.1 vs 49.2 expected. Marking the fourth straight month in contractionary territory, the reading is a poor omen for the health of the US economy over the final quarter of the year. USD index trades 97.80.

Lagarde Say ECB Will Pusruse Inflation Target

EURUSD has taken advantage of the fall in USD to trade higher again today, extending yesterday’s gains. Speaking before European Parliament yesterday, new ECB chief Lagarde said that the ECB will be “resolute” in pursuing its goal of 2% inflation and noted that the bank’s accommodative monetary policy stance will remain in place. Lagarde heads her first policy meeting this month on the 12th. EURUSD trades 1.1080 last, back above the 1.1024 level once again.

GBP Rallies on USD Weakness

GBPUSD surged higher gain today, benefiting from USD weakness. Uncertainty ahead of the elections continues to obscure price action. The latest polls show Johnson’s lead having fallen lower into single digits. While the prospect of a surprise Labour win could increase the chances of Brexit being canceled, the outlook for the UK economy is worse as a result of Corbyn’s proposed economic policies. GBPUSD trades 1.2973 last, challenging the recent highs.

Equities Suffer Heavy Losses

Risk assets have stabilized a little so far, however, the tone remains weak on the back of the heavy sell-off seen yesterday. Another bout of US data weakness, along with news that China canceled a US military visit over the US backing of the Hong Kong protesters, has soured the mood on Tuesday. The market is now concerned about the likelihood of a deal being done given the dispute over Hong Kong. SPX500 trades 3119.73 last.

JPY & Gold Rally

Safe havens have started the day on a strong footing in light of the sell-off in equities over the last 24 hours. Both the Japanese yen and gold have been higher against USD, which came under pressure in response to manufacturing data weakness. USDJPY trades 109.03 last, turning back down towards the 108.84 level. XAUUSD trades 1464.32, still well below the 1500 level despite the recovery so far.

Crude Clings On

Crude prices have bounced over early European trading today. Despite the move lower in risk assets and raising fears over the US/China trade talks, crude prices have been supported by the move lower in USD. Later today, the API will release its inventories report for a first look at US crude levels over the last week, ahead of tomorrow’s headline EIA report. Crude trades 56.30 last.

Loonie Lower

USDCAD has been lower again today though, at 1.3294, is fighting hard to recoup yesterday’s losses. The BOC meets tomorrow and while a rate cut is not the base case scenario, following the bank’s warning at the last meeting, there is plenty of downside risk for CAD. If the BOC doesn’t cut rates, its outlook is likely to be more dovish than last time.

RBA Keeps Rates on Hold

AUDUSD is higher again today, benefiting from the weakness in USD. The RBA kept rates on hold during its final meeting of the year, keeping AUD supported in the near term. While concerns around the health of US/China trade talks are hindering risk appetite, for now, AUD seems to immune to this with traders happy to bid the Aussie up. AUDUSD trades .6859 last.

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