Fear of Global Economic Meltdown Turns Investors Cautious

. 3 min read

Overview:

  • US Dollar regains stability after taking an overnight dip
  • PM Johnson unveils a final Brexit separation proposal ahead of the October 31st cliff date.
  • The Canadian dollar remains stable as GDP remains steady

Highlight:

There is growing concern that US economic growth could be coming to a halt. The business outlook remains cautious - especially exports and employment are at risk and consumer confidence is frail. All fingers point towards a prolonged trade tiff with China. Spot gold is trading higher whilst WTI arrests a six-day slide with a barrel of oil trading around $53.65. There is little on the economic slate today. FOMC member Williams’ speech is likely to attract some attraction after yesterday's poor ISM report.

US DOLLAR

The mighty greenback is steady after collapsing, in the overnight session, from a 27-month peak touched yesterday. The US Dollar Index took a hit following the soft ISM business report. The September PMI (47.8) decreased 1.3% from the previous month, contracting for the second consecutive month.

BRITISH POUND

Sterling remains under pressure as investors keep a cautious approach ahead of PM Johnson unveiling his “take or leave it” Brexit plan to the European Union. He has repeatedly said that the U.K intends to leave the EU on October 31. The major is down 0.25% at 1.2260, after recording a low of 1.2204 yesterday.  As is expected, the currency market's focus will continue to be on new development surrounding Brexit and GBP/USD will be volatile, driven by incoming headlines.

EURO

EUR/USD has recovered after falling close to a 2 ½ year lows on soft Eurozone inflation report. However, the US ISM index missed market expectations helping the pair to rebound above the 1.09 handle. Investors keep an eye on the U.S. ADP employment report and FOMC Williams' speech for further trading impetus. We expect the pair to be cautious, hover around current levels ahead of services PMI from the Eurozone (Thursday) and US employment (Friday).

CANADIAN DOLLAR

USDCAD continues to ping-pong between the 1.32 to 1.33 range. The 200-day moving average proved to be a strong resistance as USD/CAD failed to breach that level after the no-growth Canadian GDP report. The soft ISM report weighed on the US dollar, but the currency pair’s move was contained within recent ranges. It is now trading around the mid-point of 1.32 and is unlikely to venture away from current levels with no major data releases scheduled for today.

AUSTRALIAN DOLLAR

The AUD wasn't able to gain too much ground on the USD during the brief selloff dip, and AUDUSD is now hovering around 0.6700.

FEATURED CURRENCY

The US dollar is still trading with a weaker footing against the Japanese Yen with USD/JPY down 0.2%. Investors’ sentiment turned cautious after data showed US manufacturing industry, exports and employment contracting last month. The latest data is stroking fear that the global economy could indeed be heading towards a standstill or worst case a meltdown. We expect the pair to consolidate around the mid-point of 107 ahead of U.S. ADP non-farm employment change and Fed member Williams' speech.

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