05 September 2017 at 23:14 GMT
- Nothing of note due out today
US Data Released:
- Factory Orders (Actual -3.3% vs. forecast -3.3%)
The US dollar was wobbly when New York traders returned to work on Tuesday following their Labor Day long weekend. By mid-morning on Tuesday, the greenback had fallen off a cliff and looked to be in free-fall. Prices recovered somewhat, but it has yet to be determined if the dollar found a floor or merely a ledge.
The US ambassador to the United Nations in Geneva urged the UN to impose the “strongest possible” sanctions on North Korea, in response to that nation’s nuclear bomb test. In response, her North Korean counterpart Han Tae Song said “the US will receive more 'gift packages’ from my country as long as it relies on reckless provocations and futile attempts to put pressure on the DPRK.”
The threats and counter-threats were a clarion call for traders to seek safe-havens. USDJPY dropped from ¥109.40 to ¥108.64 and USDCHF sank to 0.9536 from 0.9604. Gold rallied from $1,326.50/oz to $1,344.20/oz.
EURUSD was as noisy as a dachshund in a thunderstorm. Prices bopped and weaved in a 1.1877-1.1939 range and with a bullish bias. Dovish comments from Fed officials and concerns ahead of Thursday’s European Central Bank meeting supported the single currency.
North Korea wasn’t the only concern for traders. A couple of windbags have given traders pause. Hurricane Irma, a category 5 storm is heading toward Florida and uber-dove, Minneapolis Fed President Neel Kashkari said that rate hikes were doing real harm to the US economy.
The broad US dollar weakness boosted Sterling. GBPUSD rallied from 1.2925 to 1.3041
The commodity currency bloc had a great morning and a not so great afternoon. NZDUSD soared from 0.7180 to 0.7261 with an assist from a 0.3% rise in global dairy auction prices. It managed to hang on to most of those gains by the end of the day. AUDUSD and USDCAD didn’t fare quite as well. AUDUSD soared from 0.7964 to 0.8027 and then retreated back to 0.7977.
USDCAD sank under the weight of rising crude prices and expectations for a Bank of Canada rate hike on Wednesday. The morning losses were nearly erased by lunchtime.
Oil prices soared. WTI jumped to $48.96/barrel from $47.74/b on expected crude oil demand from the restart of the Texas Gulf coast refineries.
Walls Street got spooked by North Korea and the prospect of another economy-damaging hurricane. The major indexes dropped but recovered from their worst levels, by the end of the day. Still, the major indices finished in the red.
Threats and counter-threats over North Korea were a clarion call for traders to seek safe havens, boosting the yen, and gold (above). Photo: Shutterstock.
– Edited by Robert Ryan
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Michael O'Neill is an FX consultant, currency strategist and author of the Trade of the Day at Loonieviews.net. Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.