Rates as of 0500 GMT
Oh dearCAD was the bestperforming currency yesterday, contrary to what some pundits notably me had expected. The usual relationship between USDCAD and oil prices broke down completely as oil fell I got it half right! but CAD rallied, nonetheless.
The strong loonie was attributed to the general riskon tone, bolstered by yet another blowout US indicator the ISM servicesector PMI that carried the SP 500 yet further into record territory yesterday. The Institute of Supply Managements nonmanufacturing purchasing managers index hit a record high, as did the new orders subcomponent. The prices paid index was the highest in 12 years. Data going back to July 1997.
But that routine explanation doesnt explain the dynamics of the market today why would CHF be 2 in a riskon mood and why would AUD be underperforming so much even gaining less on a tradeweighted basis than the safehaven JPY? I have to say I have no clear answers, unfortunately.
The relative underperformance of AUD might have been just some jitters ahead of the Reserve Bank of Australia RBA meeting overnight. In the event, the RBA didnt change policy I got that one right! But so did virtually everyone else too, so its not much of a win.
The RBA made some worried noises about the housing market, probably reflecting the assessment thats likely to show up in Fridays semiannual Financial Stability Review. Given the environment of rising housing prices and low interest rates, the…