After being handed a strong lead from European stocks, US stocks snapped a 7 day losing streak overnight despite economic data failing to reach estimates. The ISM Non-Manufacturing Index which measures growth in the services sector failed to meet forecast, falling to 53.8 from a previous 55.4. Analysts had expected a more subdued fall to 55. A reading above 50 denotes economic expansion, with a reading below 50 shows economic contraction. True to recent form, less than convincing economic feedback in the States helped the greenback lower against major counterparts.
The Euro maintained a positive trajectory reaching six week highs against the greenback, rising to highs US$1.2665 coinciding with strength from European and US equities. From a technical perspective the Euro closed above the 55 day moving average on Friday which points to signs of a bullish outbreak.
Yesterday’s local interest rate decision also resonated through global markets as investors took heed to the RBA’s view of the global economic outlook which was seemingly less dovish than anticipated. The RBA kept benchmark rates at 4.5 percent “pending information about international and local conditions for demand and prices” – In a statement governor Glenn Stephens acknowledged potential headwinds abroad (in reference to Europe’s uncertain economic outlook and employment woes in the States) however, the bank also suggested local growth is likely to remain about trend going forward. On China the statement said “There are indications that growth in China is now starting to moderate to a more sustainable rate.”
Overnight, the Aussie dollar continued the positive movements seen in yesterday’s session on the back of positive trade balance and rates decision, rising to highs of 85.6 US cents overnight. In the absence of economic data locally, we expect the Aussie dollar to be reactive to local and Asian equity movements. Tomorrow’s jobs data will also begin to be the focus for investors which is expected to show the Australian economy created 15,300 new jobs in June. At the time of writing the Aussie is buying 85.2 US cents.