USD sold heavily as global growth fears persist

United States Dollar:

GBP/USD - The dollar's gains came to an end yesterday as a fall in the UK’s unemployment rate, coupled with lower than expected US Producer Price Index, Retail Sales and NY Empire State Manufacturing Index, saw the dollar being sold off. The day started with sterling trading just below 1.59 against its US counterpart but figures showing UK Unemployment rate fell to 6%, bringing the number of UK unemployed below the 2 million mark, sent sterling up to just below 1.5950. This was just the start as data from across the pond showed that US recovery may not be as strong as previously thought. NY Empire state manufacturing index came in well below forecasts with a reading of 6.17 vs exp. 20.50, while Retail Sales posted a fall of -0.3% vs exp. -0.1%. Producer price index also fell from 1.8% to 1.6%. The figures fuelled fears that the US economy has started to slow down which sent cable even higher, breaching 1.60 near the end of US trading. Today’s docket is clear for the UK but further economic data from the US, in the form of Industrial Production, Jobless Claims, Capacity Utilization and the Philadelphia Fed Manufacturing Survey, will more than likely see volatility for the pair. We open today with GBP/USD at 1.60. We expect a range today in the GBP/USD rate of 1.5960- 1.6040

Euro:

GBP/EUR - Sterling seemed to be suffering with a hangover brought on by the previous day’s below par CPI numbers. Despite the UK unemployment rate falling to 6%, and average earnings excluding bonus coming in 0.1% higher than forecasted at 0.9%, investors fell out of favour with GBP and back in love with the single currency. GBP/EUR started the day at 1.2560 and had a brief up tick to 1.26 before falling 1.65 cents throughout the European sessions. This is the lowest level since the Scottish referendum and it seems the CPI numbers have dampened expectation of a UK interest rate hike until mid-2015. It will now be up to European CPI and Trade balance data, released this morning, to provide today’s volatility. We open today with GBP/EUR at 1.2480.
EUR/USD - continuing growth fears for the global economy weighed heavily on investor confidence and have seen USD sold off sharply. The 18 nation euro spent the morning hovering around its opening price of 1.2650, before lower than forecast economic data from the US had investors selling the dollar in droves. As mentioned above, below par NY Empire State Manufacturing, PPI, Retail sales and the Fed Beige book figures gave rise to fears that the US economic recovery was slowing. This sent the euro almost two cents higher against the safe haven dollar, levelling off close to 1.2840. This morning we have the release of Eurozone CPI and trade balance data with annualised CPU figures expecting a slight fall from 0.4% to 0.3%. It will then be up to another batch of broad economic data from the US to give the afternoon’s direction. We open today with EUR/USD at 1.2820. We expect a range today in the GBP/EUR rate of 1.2450 to 1.2530

Aussie and Kiwi Dollars:

The AUD and Kiwi dollars have been among the main beneficiaries of the USD sell off, with NZD leading the way. This is surprising considering the risk of trading nature we have seen, however better than expected overnight New Loans (857.2B vs expected 730B) and Foreign Direct Investment figures (-1.4% vs -1.8% previous) from China, plus the overnight increase of 1.4% in Global Dairy prices, helped the commodity linked currencies find support. Also, Business NZ PMI, an indicator of economic conditions, posted a better than expected reading of 58.1 vs 57 previous. We open today with GBP/AUD at 1.83 and GBP/NZD at 2.0170. We expect a range today in the GBP/AUD rate of 1.8240 to 1.8365 We expect a range today in the GBP/NZD rate of 2.01 to 2.0240

Data releases for the next 24 hours:

AUD: No Data

EUR: Consumer Price Index (YoY & MoM) (Sep), Trade Balance (Aug)

GBP: No Data

NZD: No Data

USD: Initial Jobless Claims (Oct 10), Continuing Jobless Claims (Oct 3), Capacity utilization (Sep), Industrial Production (MoM) (Sep), NAHB Housing Market Index (Oct), Philadelphia Fed Manufacturing Survey (Oct), Total Net TIC Flows (Aug), Net Long-Term TIC Flows (Aug)