USD weakness across the board, AUD spikes higher after RBA raises rates from 49-year low!

  • The Reserve Bank of Australia unexpectedly raised its benchmark interest's rate from 3%, a 49-year low, to 3.25% today.  The AUDUSD spiked higher as Australia became the first Group of 20 nations to raise borrowing costs since the start of the global financial crisis more than a year ago.  The Aussie jumped from a low of 0.8758 to over 0.8850 just before the decision was announced.
  • Governor Stevens stated that the risk of serious economic contraction in Australia now has passed and it is prudent to begin gradually lessening the stimulus provided by monetary policy.  His purpose in raising the rates is to support sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead.  The RBA has flagged further increases in coming months amid signs the economy is strengthening.
  • The greenback was pressured after Gulf Arab states are planning to switch to a basket of currencies for oil trading.  News said that instead of the USD, the proposed currency basket will include Japanese yen, the euro, RMB, gold, gold and other currencies.  This is negative for the world reserve currency as major resources and commodities have been priced in USD for a long time.
  • Investors dumped the greenback as the ISM non-manufacturing index increased to 50.9 in September from 48.4 in the previous month, pushing US equities higher.  Crude oil rebounded strongly from lower prices marking an intraday high about $71 a barrel.  Gold price rallied above $1020 on the back of the weaker dollar making the precious metal more attractive as an alternative investment.

Currency to watch out for: AUDUSD & GBPUSD

  • The AUDUSD pivot point is at 0.8800 with a preference to enter into long positions above 0.8800
  • The GBPUSD pivot point is at 1.5900 with a preference to enter into long positions at 1.5910

Today's calendar and market movers:

  • UK Halifax HPI month on month expected to drop to 0.6%
  • UK Manufacturing Production month on month expected to drop to 0.4%
  • Canada Purchasing Managers' Index expected to rise to 56.6

Stocks:

  • US stock market advanced.  The Dow added 0.79%, the S&P gained 1.1% and the NASDAQ gained 1.11%.
  • As of 06:05 GMT the Nikkei is trading at 0.18% and the Hang Seng at 0.68%