Sydney (05/10/10) – Wall Street recorded a strong move on Tuesday with the Dow Jones rising 190 points intraday due to a strong service sector results. Announcing a rise to 53.2 for the month of September, economists had a conservative estimate for the period due to economic pressures. In other surprising news, the Bank of Japan (BOJ) announced that the benchmark interest rate would be cut to further assist in stimulating the economy. With a 0-0.25% range, the Japanese government also announced the resumption of asset purchasing with a 2 trillion yen amount allocated. British economic figures boosted confidence in the European markets with the services sector recording a strong result. Economists had expected a weaker forecast. On the corporate front, machinery company Caterpillar was 3% stronger intraday after the renewed economic vigour pushed the sector higher. American Express continued to fall during the session, with traders eyeing its credit card decision from the previous day. Energy stocks Chevron and Exxon Mobil were helped by solid rises in light crude futures and natural gas. Trading at $63.17, traders and analysts found solstice in the Exxon with yield and commodity strength helping buoy the price. On the commodities front, Gold rose 1.89% late in the session to $1342 an ounce. Indian wedding season and weakness in the greenback pushed the precious commodity to new levels. Light Crude Oil futures were substantially stronger with the economic barometer rising 1.6% to $82.82 a barrel. The VIX felt the full effects of renewed market sentiment with a 7% fall to 21.87.
USDJPY>>The BOJ took steps to control the yen’s appreciation on Tuesday with a lowering of the benchmark rate level to 0-0.25%. In an attempt to stimulate the overall economy, the central bank also highlighted asset purchases with a 5 trillion yen war chest. Economists and traders found the news to be favourable initially with a rise in the greenback against the currency before settling at 83.33.
AUDUSD>> The Australia dollar fell sharply against the US dollar during the session with the RBA announcing that rates would stay on hold. Citing uncertainty in the global economy and slight consumer demand weakness for the move, traders exited positions. Analysts noted that the currency was an attractive yield option, with many investors expecting a rate rise today. The AUDUSD traded at 0.9595 at lunch.
EURUSD>> Strong buying from Asia pushed the euro higher against the dollar with decisive interest rate announcements in Australia and Japan highlighted as contributing factors. Traders assessed their risk appetite and looked back at the traditional major currencies, with the euro benefiting greatly. Trading at 1.3776 at lunch, the lustre of possible economic stability in the euro zone emerged with substantial volume reweighting.
USDCHF>> Strength of the euro spilled over into the swiss franc during the day with the USDCHF trading at 0.96825. Deemed as a safe haven currency, traders were attracted to the currency as a hedge against adverse possible economic announcements in the US. Traders are eyeing important nonfarm payrolls on Friday for further direction.
GBPUSD>> Private Sector growth figures beat economists’ expectations on Tuesday, pushing sterling to 1.58806 against the greenback. A positive result for the economy, traders still emphasised the caution surrounding the global recovery and the relative uncertainty of consumer sentiment, employment and housing.
USDCAD>> The Canadian dollar continued to strengthen against the greenback on Tuesday with interest rate announcements in Asia having little impact. Trading within a relatively tight range for much of the session, the CAD recorded low volumes. The USDCAD traded at 1.02072 during lunch London time.