Muted response to US government shutdown

There was a muted response from the markets yesterday to the US government shutown, the first for 17 years, yesterday with the dollar slowing falling to a new 8 month low against the pound.

Data wise, the dollar found some support from the release by the data release from the Institute for Supply Management which reported that its purchasing managers index rose from a figure of 55.7% in August to 56.2% in September, ahead of the 55% expected by analysts.

The pound rose again against the euro to reach a new 9 month high after data from Eurostat, the euro zone’s statistics office showed that the euro zone unemployment rate remained unchanged at 12% in August.

Analysts continue to predict a slow recovery in the euro zone’s labour market because of the current austerity measures in place throughout the region.

Meanwhile, the Australian dollar rose strongly after the Reserve Bank of Australia (RBA) kept its official cash rate unchanged at the record low figure of 2.5% for at least another month despite some speculation that another interest rate cut is imminent to help the flagging Australian domestic economy.

The statement accompanying the policy decision showed that the RBA feel that recent information is consistent with world economic growth running a bit below average for the remainder of this year but the prospects for a pick-up in 2014 are reasonable. The RBA also commented that worldwide commodity prices have declined from their peaks but still remain at high levels by historical standards and inflation in most countries remains well contained.