Election results and ADP pushes Dollar to new highs

November 6, 2014

It was another big moving day for the market. We witnessed a rocketing USD across the board and over a $30 slump of Gold. The USD Index surged to a new high of 87.70 during the day, as the Euro and Yen depreciated by 1% against the Dollar.

In the midterm US election, Republicans gained majority of seats in the Senate and the House for the first time since Mr. Obama took Presidency. The result eliminated prior feelings of uncertainty and inspired the Dollar’s rally, and with that, pressed the gold price lower breaking its $1160 support. The slump did not stop until the price hit $1137 per ounce. It finally closed at $1143 this morning. The forecasts for the price of gold by investment banks have been downgraded to $1000-1050 – with some even claiming $900.

XAUUSD 061114 | Vantage FX

A disappointing Service PMI which was the lowest in seven months indicates the growth of the Eurozone economy as still weak. Markit pointed out that the data implied that the Q4 GDP expansion may fall to 0.2%. If true, the ECB may confront more pressures to implement further easing, especially when the Yen’s depreciation has significantly pushed up the exchange rate of the EUR/JPY pair.

EURUSD 061114 | Vantage FX

UK service PMI was also below expectations, supporting the BOE in holding interest rates for longer. The Sterling, as such, renewed recent lows to 1.5868 as market participants cut the speculation on a rate hike.

GBPUSD 061114 | Vantage FX

The Aussie Dollar finally broke the 0.8650 support and is heading towards 0.85. More space for falling may also have been opened.

AUDUSD 061114 | Vantage FX

The Asian stock markets changed little with the Japanese market cooling down. The Nikkei Stock Average rose 0.44% to 16937. The Shanghai Composite lost 0.37% to 2419. ASX 200 slid 0.04% to 5518. In European stock markets, the UK FTSE was up 1.32%, the German DAX surged 1.63% and the French CAC Index rose 1.89%. The US market closed higher on midterm election results. The S&P 500 gained 0.57% to 2024. The Dow rose 0.58% to 17484, while the Nasdaq Composite Index dropped 0.06% to 4620.

On the data front, Australian Unemployment Rate and Employment Change will be at 11:30 AEDST. The UK Manufacturing Production will be at 20:30 AEDST. Around midnight, BoE and ECB will both release their latest statements and the US will disclose weekly unemployment claims.

Have a great trading day!

Anthony

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