Risk relapsed in the NY session despite better than anticipated economic data and inter-market correlations came back to the fore. ISM manufacturing printed a better than expected 52.9 in August from 48.9 the prior month but this was not enough to sustain early gains in equities. This continues the pattern of data that is better but not good enough. The S&P eventually crumbled and a break below the 1014 Fibonacci level elicited heavy selling. The index closed below 1000 for the first time in nine sessions, down -2.2% on the day. Treasuries were better bid and the 10-year yield shed more than 3 beeps to 3.36%. Gold managed to break from commodities and added $5 to $957 as the precious metal regained its safe haven status briefly. Oil, meanwhile, collapsed to below $68 after failing on a test above $71 early in the session.
The risk-off price action was great news for the US dollar and the negative correlation with equities we have seen all year was evident again. EUR/USD collapsed from an overnight high 1.4373 to a NY low at 1.4178 before settling near 1.4220/30 ahead of the close. Cable was decimated from the 1.6376 high all the way down to the 1.6114 level. The yen crosses, meanwhile, were not surprisingly better offered. EUR/JPY sank from a 134.15 high to sit near the 131.86 low at last look. It was also a bad day for the commodity currencies. USD/CAD soared to 1.1068 from a 1.0873 overnight low and remains better bid while above the 1.10 mark. AUD/USD tested the air above 0.84 in early trading before knifing down towards the 0.8250 area ahead of the close. Australian GDP due up overnight should see the price action heat up here.
Upcoming Economic Data Releases (Asia Session) prior expected
- 9/2 1:30 GMT AU Gross Domestic Product (QoQ) 2Q 0.40% 0.60%
- 9/2 1:30 GMT AU Gross Domestic Product (YoY) 2Q 0.40% 0.70%
