Intraday Market Thoughts

Fresh Dollar Questions, Aussie GDP Next

by Adam Button
Dec 2, 2015 0:18

US dollar bulls were having second thoughts about the Fed after the softest ISM manufacturing report since 2009. The dollar and CAD lagged while the antipodeans led the way. Australian GDP and a key Fed speaker are due next. Our GBPAUD short in the Premium trades was closed with a 363-pip gain.  : جدول محتويات فيديو العربي -  مع تحذير الأسترالي و صفقة بيع الأسترليني مقابل الأسترالي قد أغلقت مع 362 نقطة ربح

ISM manufacturing fell into contractionary territory at 48.6 compared to 50.5 expected. The soft factor report adds ammunition to those who think the strong US dollar will crimp manufacturing in the near future. It's a good reason for the Fed to be cautious at the Dec meeting and coupled with additional soft releases could crack open the door towards another month of the Fed deciding to wait and see.

The US dollar fell across the board on the release but the bond market was even more frightened as 10 year yields fell 6 bps to 2.14% and erased the entire November gain. The Australian dollar was particularly strong against USD after the data as it climbed above 0.73 to finish up a cent on the day. We wrote yesterday about background signals that were positive for AUD and continued RBA optimism, upbeat building approvals, plus a strong exports report accelerated the gains.

The Aussie will remain in the spotlight in the hours ahead with Q3 GDP data due. So far Q3 trade has been strong but that may be balanced by weak capex and construction spending. The market is now leaning towards a 0.8% in Q3 GDP in the 0030 GMT release. If it's soft and AUD doesn't back off much it's yet another signal about underlying demand.

The other events to watch in Asia-Pacific trading are central banks. The Fed's Brainard speaks at 0100 GMT. There has been little spoken from Fed Governors recently and they represent the silent majority at the Fed. In the unlikely event that she casts doubts on a Dec cut, it could open up a world of hurt for the US dollar.

The BOJ's Iwata out at 0130 GMT. The Bank of Japan is in a clear wait-and-see mode on further QE, so we don't expect much here.

Act Exp Prev GMT
Net Exports of GDP (Q3)
1.5 1.2 -0.6 Dec 01 0:30
ISM Manufacturing (NOV)
48.6 50.5 50.1 Dec 01 15:00
ISM Prices Paid (NOV)
35.5 40 39 Dec 01 15:00
FOMC's Brainard Speech
Dec 02 1:00
Fed's Lockhart speech
Dec 02 13:10
Fed's Yellen Speech
Dec 02 16:00
FOMC's Williams speech
Dec 02 20:40
Fed's Yellen testifies
Dec 03
Building Approvals (m/m)
3.9% -2.4% 2.3% Dec 01 0:30
Construction Spending (OCT) (m/m)
1.0% 0.6% 0.6% Dec 01 15:00

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