The Greenback got a strong boost from better than expected manufacturing PMI data, as these lifted expectations for the NFP and therefore a December Fed rate hike. The ISM reading rose from 58.8 to 60.8 versus the consensus at 57.9 while the Markit final reading reading was upgraded from 53.0 to 53.1. Components for employment and prices both posted strong gains. Only a speech by FOMC member Powell and the total vehicle sales report are lined up today.
The euro was one of the weakest performers as it was dragged down by the Catalonian elections. The vote for independence sets a precedent for other European nations seeking their own government and undermines the strength of the union, although the Spanish government is still challenging the constitutionality of the vote. Euro zone data came in mixed, with the jobless rate and Italian final manufacturing PMI coming in weaker than expected and the rest coming in mostly in line with consensus. German banks are closed for the holiday today while the Spanish unemployment change reading is due.
The pound was also in a weak spot as Brexit risks remained in the spotlight while data came in weak. The manufacturing PMI slipped from 56.7 to 55.9, lower than the estimated drop to 56.3. Construction PMI is due today and no change from the earlier 51.1 figure is expected. Market attention could still be focused on Brexit-related updates as the UK government scrambles to restore confidence in their bargaining stance.
The franc tracked the losses of its fellow European currencies as Swiss retail sales disappointed with a 0.2% drop instead of the estimated 0.5% uptick. A bit of risk aversion kept the Swiss currency supported and the lack of reports from Switzerland today could leave market sentiment in play.
The yen raked in some gains against most of its peers as risk-taking tumbled on geopolitical concerns. Among these are the violence in the Catalonian polls and the deadly attack in Las Vegas. Japan’s final manufacturing PMI was also upgraded from 52.6 to 52.9. There are no reports due from Japan today so risk sentiment could push yen pairs around.
Commodity Currencies (AUD, NZD, CAD)
The comdolls fell victim to risk aversion and dollar strength but managed to chalk up gains against the European currencies. Rising oil output weighed on the commodity and the positively-correlated Loonie while the Aussie recouped some of its previous losses ahead of the RBA decision. No actual rate changes are expected but a shift to a more cautious stance is eyed. New Zealand has its GDT auction coming up in the late US session and another gain in dairy prices could be Kiwi bullish.