Article Highlights

  • US Richmond Fed manufacturing index: -5 vs. 4 expected, 0 previous
  • US FHFA house price index: 0.6% vs. 0.4% expected, 0.2% previous
  • EZ flash consumer sentiment: -7.1 vs. -7.0 expected, -6.9 previous
  • Japanese markets out on Autumnal Equinox holiday
  • AU’s leading index, China’s Caixin flash manufacturing PMI on tap
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Another one bites the dust! Risk aversion took another chunk of pips from high-yielding currencies yesterday, as forex market players traded the same concerns on a different day.

There were no new market movers printed during the U.S. session, but lingering uncertainty over global growth and the impact of the Fed possibly hiking its rates this year were enough to sustain the overall risk aversion theme in the markets.

In case you’ve just tuned in to the forex scene, then you should know about the other factors that made it easy for the low-yielding dollar to dominate. For starters, the euro is taking serious hits from the euro zone’s underwhelming growth and the possibility of the ECB extending its QE program to boost the economy some more. Meanwhile, the pound reeled from a weaker-than-expected public borrowing and CBI industrial trends report printed in early London trading.

EUR/USD fell by another 28 pips (-0.25%) to 1.1133 while GBP/USD dropped by 66 pips (-0.43%) to 1.5373. The European currencies also fell against the yen with EUR/JPY slipping by 19 pips (-0.14%) to 133.69 and GBP/JPY plunging by 62 pips (-0.34%) throughout the session.

Commodity-related currencies also had a bad day thanks to global growth (but mostly China’s growth) concerns and Fed rate hike prospects. Gold fell by 0.7% to $1,124.80 per troy ounce while copper prices dropped by 2.0% and crude oil futures settled 1.8% lower to $45.83.

AUD/USD inched 5 pips lower (-0.07%) to .7088 after hitting a low of .7057 while AUD/JPY also hit 84.65 before closing at 85.10. Meanwhile, USD/CAD popped up to 1.3298 before closing at its 1.3259 open price and CAD/JPY ended the session with an 80-pip loss (-0.88%) to 90.57.

Last but not least is the dollar, which not only gained on the higher-yielding currencies but also registered positive pips against its low-yielding counterparts. If you recall, hawkish speeches by Fed members like Bullard and Lockhard yesterday stoked speculations that the Fed is still willing to raise its rates some time this year.

USD/JPY popped up by 11 pips (+0.09%) to 120.08 while USD/CHF inched 16 pips higher (+0.16%) to .9747.

Will we see a shift in risk sentiment today? Though Japan’s markets are out on Autumnal Equinox holiday, other Asian session forex traders are in for a potentially volatile session.

China’s Caixin flash manufacturing PMI at 1:45 am GMT is expected to print a reading of 47.5 after coming in at 47.3 last month. A significant miss might exacerbate the risk aversion in the markets while a clearly positive reading might reverse some of this week’s moves. Remember that a reading below 50.0 means the industry is contracting while a reading above 50.0 hints at industry expansion.

Given the way China’s potential economic growth weakness has already affected the comdolls and other higher-yielding currencies, you can be sure that market players are watching this one closely. Better make sure you are, too!

See also:

London Session Recap

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