USD drops as ISM misses; Pound gains as BoE stand pat

Summary:

• USD comes under pressure as ISM misses forecasts

• GBP moving higher after BoE keep policy unchanged

• Stocks jump on Trump tweet but markets remain below key levels

 

The last few days of October saw a fairly strong push higher in the US dollar, with the buck seemingly benefitting from some positive month-end flows. Now November has begun however, there’s been some notable selling with the greenback lower on the day against all of its peers. The largest gains in G10 space can be seen in the antipodean currencies with the Aussie and Kiwi up by almost 2% on the day.

 

In terms of data this afternoon there’s been 2 releases of note from the US with the latest weekly employment numbers and the ISM manufacturing PMI. More important for the US dollar, is the latest manufacturing figures with the ISM PMI for October coming in below forecasts. A print of 57.7 was below the 59.0 expected and marks a fair size drop from the 59.8 seen previously. Also of note from the report was the employment index which dropped to 56.8 from 58.8 prior and new orders which fell to 57.4 from 61.8 previously. The drop in new orders could be particularly significant as it is down form 65.1 two months ago and has seen a pretty sharp decline of late.   

 

As was widely expected the Bank of England have voted unanimously to keep the current policy mix in place, with the base rate unchanged at 0.75%. The overall tone of the accompanying statement was fairly mixed and as thus, there’s been a fairly muted market reaction with the pound remaining close to its highest levels of the day. . Stating that the output gap has closed and that this may mean a possible faster pace of hikes post-Brexit is arguably the most hawkish comment and pound bulls may look to focus in on this with the GBPUSD on track for its 5th largest daily gain since the 2016 referendum.

US president Donald Trump has taken to social media this afternoon to deliver news on what appears to be a possible breakthrough on the current US-Sino trade tensions. It should be pointed out that the language in this latest tweet is pretty vague but there have also been positive noises from the other side of the Pacific which suggests progress is being made. Chinese Premier XI has been quoted in the country’s state media as saying shortly afterwards that he hopes China and the US can promote a steady, healthy relationship based on an important mutual understanding achieved with Trump. The US500 jumped on the tweet from Trump with price gaining almost 20 points in just a matter of minutes after it was posted. The market has rallied from its lowest levels of the day around 2708 to not far from Wednesday’s peak of 2737.