![]() US rates are higher across the curve, with the 2-year rate lifting 7bps to 4.16% and the 10-year rate up 14bps, to 3.77%. Just as the downside surprise to the ISM Manufacturing index earlier in the week drove a big fall in rates and the USD, there’s been a big reversal of those moves overnight. Market attention will now turn to the nonfarm payrolls report released tomorrow night. The ISM Services index suggests the former interpretation, with services sector activity levels still holding at very healthy levels for now. The Prices Paid component fell again, but, at 68.7, it remains relatively high (the manufacturing equivalent is just 51.1), consistent with still-elevated inflationary pressures in the services sector.Īs we noted earlier this week, it was uncertain whether the weakness in the Manufacturing ISM reflected the long-awaited rotation from consumer spending on goods back to services, or whether it hinted at a broader slowdown in economic activity. The key New Orders subcomponent remained at very healthy levels, above 60, while there was a notable increase in the Employment index, which rebounded back into expansionary territory, at 53. As it happened, the Services index was stronger than expected, falling marginally from 56.9 to 56.7, levels still consistent with strong growth in the services sector. After hitting 0.58 in the wake of the RBNZ, the NZD is back to 0.5720 this morning.Īfter the weak ISM Manufacturing survey earlier this week, which had reawakened recession fears, there was greater than usual focus on the ISM Services index overnight. There was a slightly hawkish tinge to the statement, given the RBNZ discussed a 75bps move, but the market reaction has been fleeting. The RBNZ raised the OCR by 50bps yesterday, as expected. OPEC+ cut oil production quotas by 2m barrels per day, but oil prices are only modestly higher as the US said it would release more oil reserves from the SPR. ‘Bad news is good news’ remains the prevailing theme in equity markets, with the S&P500 down around 0.5% overnight, slightly paring its gains over the past two days. The US 10-year rate is 14bps higher and back above 3.75% while the EUR, which got within a whisker of hitting parity yesterday, is back below 0.99. If a currency is not competitively priced, traders may avoid buying, or even sell it, essentially driving down its value.A stronger-than-expected ISM Services index overnight has helped drive a sharp increase in global rates and the USD overnight, reversing the moves from earlier in the week. If a currency is competitively priced, traders will buy the currency, essentially driving up its value. The value (or price) of a currency is determined by its traded volume. Government central banks also have the ability to set a currency at a constant price through a method called pegging, which essentially tethers the value of one currency to another. The volumes of currencies traded are increased and decreased depending on the attractiveness of any particular currency, which depends on a multitude of factors such as political stability, economic strength, government debt and fiscal policy among others. One currency can be purchased by another currency through banking institutions or on the open market. Currencies are traded (bought and sold) daily around the world. For example, if you want to exchange Australian Dollars into US Dollars.Ĭommission – This is a common fee that foreign exchange providers charge for exchanging one currency with another.Įxchange rates are influenced by banks and trading institutions and the volume of currency they are buying and selling at any given time. Spread – This is the difference between the buy and sell rates offered by a foreign exchange provider such as us.Ĭross rate – This is the rate we give to customers who want to exchange currencies that do not involve the local currency. In the business, this is sometimes referred to as a ‘spot rate’. It is the rate banks or large financial institutions charge each other when trading significant amounts of foreign currency. Spot rate – This is known more formally as the ‘interbank’ rate. Holiday money rate or tourist rate – This is another term for a sell rate. For example, if you were returning from America, we would exchange your US Dollars back into British Pounds at the buy rate of the day. For example, if you were heading to Europe, you would exchange British Pounds for Euros at the sell rate.īuy rate – This is the rate at which we buy foreign currency back from you into your local currency. Sell rate – This is the rate at which we sell foreign currency in exchange for local currency. ![]() Foreign exchange can be confusing, so to help break through the confusion, here are some common terms associated with currency:
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