The greenback and yen fall on increasing risk appetite as a battery of US economic data beat expectations.

  • The ISM Manufacturing index increased more than expected to 55.7 from 52.6 a month ago.  The Institute of Supply Management said the data for the factory index for October rose at the fastest pace in more than three years, suggesting that the US economy is growing after months of contraction.
  • Pending Home Sales surged 6.1% in September, compared with market expectation of 0.4%, following a 6.4% jump in the previous month.  Also, Construction spending climbed 0.8% despite market forecasts of a -0.4% decline.
  • Australia raised its interest rate by 0.25% for the second time in four weeks, becoming the first nation to raise borrowing costs twice this year as the global economy picks up.
  • The RBA lifted the overnight cash rate target to 3.5% from 3.25%; some economists were expecting a 0.5% hike.  The AUDUSD retreated towards the 0.89-level as traders pared bets on the size of future interest-rate increases after Stevens said policy makers judge it's prudent to gradually boosts borrowing costs.
  • Gold strengthen further as questions about the US financial sectors triggered a selloff in of the greenback and uncertainty in the stock market.  Risk aversions soared rapidly last week amid worries that global economic growth has run out of steam.  Bankruptcy of CIT banking group acted as another signal that US financial sector was not doing as good as the market anticipated.
  • Gold is likely to test the record high at 1072 in the near term as it rallied to levels above 1066 today.  Crude oil prices remains stable at $78 a barrel after the 1.5% rally from yesterday.

Currency to watch out for: AUDUSD & EURGBP

  • The AUDUSD pivot point is at 0.8985 with a preference to enter into long positions above 0.8985.
  • The EURGBP pivot point is at 0.8990 with a preference to enter into long positions above 0.8990.

Today's calendar and market movers:

  • UK Construction PMI expected to rise to 47.2
  • US Factory Orders month on month expected to rise to 0.80%
  • Today, the Federal Reserve is set to begin its two-day policy meeting and the FOMC statement due to be delivered tomorrow.

Stocks:

  • US stock markets initially advanced as driven by encouraging data.  However, the rally faded after the Fed's Greenlee said that 'poor loan quality, subpar earnings and uncertainty about future conditions raise questions about capital adequacy for some institutions'.
  • The indexes end higher with the Dow up 0.8%, the S&P up 0.7% and the NASDAQ up 0.2%.