US Dollar Weak as Rate Hike Odds Reduced, UK Manufacturing Falls

The U.S dollar was in further decline on Tuesday due to a weak ISM Non-Manufacturing reading that depicts a similar picture from the US Manufacturing ISM report from last week. This news comes as yet another blow to Janet Yellen’s plan to increase the Federal Interest Rate. Yellen appeared optimistic and hawkish pending “good economic data” after last week’s FOMC minutes. Investors sentiment towards a U.S rate hike by the end of 2016 dropped even lower to 15% for September and 39.1% in December, and an evident liquidity influx occurred to US equities. VIX (Volatility Index) futures for September dropped below 13.95 for the first time in over two weeks showing a potential bullish short-term market for American stocks.
A declining U.S Dollar Index, trading at 94.83, elevated demand for other world currencies.

The UK Manufacturing dropped to -0.9% compare to -0.2 in June.   Industrial production for July climbed 0.1%, in line with expectations. In reaction, GBP/USD dropped and trading at 1.3379.

Yesterday, the Reserve Bank of Australia decided to keep the interest rate at 1.5%. Short positions among retail traders are 9.9% higher this week than last week for the AUD/USD pair. The 2Q YoY GDP in Australia came in at 3.3% compare to 3.4% in the previous quarter. MoM figure rose 0.5% compare to expectations of 0.6%. The Aussie is trading at 0.7663 down 0.23% while the Kiwi climbs 0.46% 0.7449.

For Commodities highlights, Ethanol showed a gap up to 1.500 following harsh criticism from the public towards the Environmental Protection Agency. Every three months, the U.S federal agency is supposed to report potential environmental concerns throughout the entire biofuel industry but records show that they haven’t issued a report since 2011. More public pressure on the corn-derived alcohol is causing future supply concerns hence the jump in price.

As the USD declined, the demand for gold and other precious metals increased. Gold futures finished up yesterday at 1354 per troy ounce. On Wednesday morning, gold futures trading steady at 1353.54. Precious metals prices look for Federal reserve rate decision in order to find direction.

The spread between WTI Crude and Brent Crude have reached the highest mark since the beginning of the year at 2.84.  As the spread increases between the two assets, so too does the amount of imported oil to America’s East Coast, which mostly comes from Saudi Arabia. Transportation costs still continue to be a concern for U.S oil companies and it seems that with oil under $50 per barrel, it is cheaper to import foreign oil than ship it from U.S refineries to the East Coast.

At 14:00 GMT, Canada is expected to release its interest rate decision on whether or not to change the current of  0.5%. Analysts believe that Canada’s Central Bank will maintain the status quo.