by Nicholas Cork
AUD opens on 70 cents again this morning after a 5 cent movement yesterday. Most of the action appeared to happen within a 30 minute window after the NY close, with an initial profit warning from APPLE attributed to China spooking the market again and in-turn saw a rapid flight to YEN, which quickly moved 400 points higher against the USD. The AUDUSD simultaneously fell from 70 cents to approximately 0.6750 and back above 69 cents again, all within 20 minutes. Subsequently AUDJPY was the big mover as it fell from above 76.00 to below 72.00 but regained most of that ground overnight. The market was illiquid due to a Japanese holiday but those type of mainly inexplicable large moves are damaging to the market reputation, as participants are still trying to identify the underlying cause with algorithmic trading already being pointed at. However the fact is we saw a 10 year low in AUDUSD, AUDJPY and AUDEUR yesterday morning, not insignificant events.
US equities had opened defensively on the Apple news, and came under further pressure after the US ISM, a key US manufacturing index, had its largest fall since 2008 dropping over 5%. The fall was well above market expectations and shows the most decelerating rate of manufacturing growth in the USA in over 2 years. This adds to the global manufacturing slowdown noted in data this week, and as traders appear fully focused on a global manufacturing slowdown, (this week anyway), worth noting that PMI releases are expected across Asia today also. The DOW looks like closing down approximately 650 points or 2.8%, with Apple 10% lower.
US interest rate yields continued their descent with the 10 year yield touching one year lows, and bond traders are now fully pricing in a Federal reserve rate cut by April 2020. It feels familiar to the path the RBA took post GFC when they went from 3% to 4.75% and back to 3% in just under 3 years. Uncertainty abounds……
AUDUSD vs AUDJPY – tend to track each other
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