• The dollar fell on Monday as the G-7, not addressing the dollar weakness, just repeated its statement from the previous two meetings that excessive volatility and disorderly movements in exchange rates threaten the global stability. The ISM US non-manufacturing index expanded for the first time since August 2008. The S&P 500 index rose 15.25 points to 1,040.46, supported by optimistic global PMI reports and upgrades from Goldman Sachs. The yen reversed earlier losses incurred after Finance Minister Hirohisa Fujii stated that Japan is open to intervening in the currency market if currencies show some excessive moves. The euro rose on strong European PMI data. European Central Bank President Jean-Claude Trichet said the need to rebalance the global economy does not mean the EUR/USD should have to rise. Sterling was supported by the stronger-than-expected UK services PMI. The Canadian dollar rose. Bank of Canada Governor Mark Carney said he sees continuing downside risk to inflation with an appreciating loonie, but major imbalances are between surplus and deficit currencies.
  • The AUD/USD rose as risk appetite increased and speculations grew that the Reserve Bank of Australia might raise interest rates on Tuesday. However, it is more likely that the RBA will maintain its key interest rate at 3.00% tomorrow and raise rates later this year. The pair was also supported by Australian job advertisements climbing at their fastest pace since 2007 and the rising Australian services PMI. The AUD/USD hit a yearly high last week, but failed to hold on the gains as stocks and commodity markets consolidated gains. There are resistance in the 0.88 area and support in the 0.85-0.86. If the support is broken, the pair will turn bearish.


Financial and Economic News and Comments

US & Canada

  • The ISM US non-manufacturing index rose more than expected to 50.9 in September from 48.4 in August, indicating that US service industries, after 11 consecutive months of contraction, expanded for the first time in a year amid an economic recovery, data from the Institute for Supply Management showed. The index' major components rose in September. The business activity index jumped to 55.1 from 51.3, indicating the second consecutive expansion since September 2008; the new orders index rose to 54.2, the highest since October 2007, from 49.9; and the supplier deliveries index grew 50.0 from 49.0. The employment index advanced to 44.3 in September, the highest since August, from 43.5 in August. The prices paid index dropped to 48.8 from 63.1.



  •  The eurozone composite PMI rose to 51.1 in September, up from a previously reported 50.8 and August's 50.4, final September PMI data from Markit Economics showed, indicating manufacturing and service industries in the euro area expanded for a second consecutive month. The eurozone services PMI advanced to 50.9 in September, revised up from a previously reported 50.6, following 49.9 in August, showing the first service-sector expansion in 16 months.
  • The Sentix eurozone investor sentiment index advanced more than expected to -12.57 in October from -14.61 in September, indicating eurozone investor confidence climbed to the highest level since July 2008, data released by Sentix showed. The current conditions index increased to -29.25 in October from -32.75 in September, and the expectations index rose to 5.75 from 5.50.


  • Eurozone retail sale declined a less-than-expected 0.2% m/m in August, the same rate as in July, according to data released by Eurostat. August retail sales fell 2.6% y/y, a 15th year-on-year fall, following July's revised 1.9% y/y decrease.


  • The German services PMI declined to 52.1 in September, down from a previously reported 52.2 and August's 53.8, indicating the German services sector expanded for a second consecutive month, according to final September PMI data from Markit Economics.
  • The CIPS/Markit UK services PMI rose more than expected to 55.3 in September from 54.1 in August, indicating the UK services sector expanded for a fifth consecutive month and reached the strongest level since Q3 2007, data from the Chartered Institute of Purchasing and Supply and Markit Economics showed, adding to signs of a UK economic recovery.


  • The Australian Industry Group/Commonwealth Bank performance of services index rose to 49.3 in September from 48.0 in August, suggesting Australia's services sector moved closer to growth at the 50.0 expansion level, a report by the AiG and Commonwealth Bank of Australia showed. The indexes on new orders and supplier deliveries grew into expansionary territory. New orders rose to 50.7 in September, the second expansion this year, from 47.1 in August, while supplier deliveries climbed to 51.1, the first expansion since March 2008, from 47.0. The employment index improved to 49.9 in September, the highest level since May 2008, from 48.6 in August.

FX Strategy Update

Primary TrendPositiveNegativePositiveNegativeNegativePositiveNeutral
Secondary TrendPositiveNegativeNegativeNegativeNeutralPositiveNeutral
Start Position1.4575N/A1.63461.03851.08910.6601N/A

Download commentary as pdf-file »