The USD thundered back to life, augmented by startlingly positive US GDP and labour market data. Also, investors were quick to put the recent North Korean flair-up in the rear view mirror as haven assets lost their endearment and US equity markets rebounded.
Risk-off flows are becoming an increasingly ephemeral event and are proving to be excellent opportunities for strapping on risk. The latest round of risk aversion was over in a heartbeat as investors continue to bank on amiable central bank policy as opposed to a militaristic escalation in North Korea
Also, the lack of fire and fury from President Trump and a more calculated While House response was viewed as far more market friendly and quickly eased investor angst. All in all the markets regained their composure quickly.
Hurricane Harvey continues to leave a nasty footprint, devastating Southeast Texas and Louisiana coastal communities while weighing negatively on crude demand from the heart of the U.S. petroleum refining industry. So while the gasoline premium rises, WTI prices continue to fall as there are few venues available to pick up the processing slack.
But, significant for currency traders, Harvey’s fallout has inspired a whole new level of debate regarding the debt ceiling showdown as to how the US government will meet federal assistance needs among the debt ceiling debate. But logic should dictate that to not approve a debt ceiling extension would prove to be political suicide for those in opposition given the humanitarian element of this recent natural disaster.
Euro
The ECB will certainly take some consolation. The euro assent reversed as the unexpectedly boisterous US GDP data has lit a fire under the US dollar overnight. Also, the US ADP report had tongues wagging: +237k (vs the +185k expected) – not surprisingly sending analysts scurrying to rethink their NFP headline. But the chance of an uptick in the wage growth component of NFP is what has traders buying the buck in the wake of the back-to-back strong employment reading from both Tuesday’s surging US consumer confidence and last night's stellar ADP.
Japanese Yen
The dollar-yen pair continues to move higher as the risk recovery which began late in the US trading session on Tuesday rolled on overnight as Wall Street extended gains while haven assets were sold off. However, not to completely sugar coat recent events, traders remain dispassionate with the UN resolution on North Korea. Still, with risk rebounding and robust US economic data leading the charge, the current move higher could have some more room to play out.
Australian Dollar
The Australian dollar retreated, giving up earlier gains against the greenback after building approvals fell less than expected in July as the resurgent USD takes center stage after a forecast-beating US GDP print. However, with risk sentiment surging the Aussie is unlikely to run too far south from current base levels.