Summary:

• USD rising against all its peers barring GBP
• ISM beat adds to demand for the buck
• USDMXN back above 20 handle; 15-month high

The US dollar was on course for a solid day of gains before the latest US data and a better than expected ISM release has boosted demand for the buck further. For the non-manufacturing print a reading of 58.6 marks a decent gain on the prior of 56.8 and is solidly above the 57.6 expected. Looking at the ISM components the report is pleasing on many levels for USD bulls with prices paid (64.3 vs 61.8 prior), new orders (60.5 vs 60.0 prior) and employment (54.1 vs 53.6 prior) all moving higher.  

 ISM non-manufacturing PMI rose to 58.6 after a disappointing 56.8 last time out. This metric has moved back close to its highest level in over 5 years. Source: Bloomberg

In fact, the only currency performing better than the greenback is the pound, which itself is higher due to some positive services data from the UK this morning. The moves higher against most of the majors are fairly measured although there are some large moves against emerging market currencies. 

 The USD is enjoying a solid day of gains with broad gains seen. The largest moves are coming against EM currencies such as ZAR, BRL and MXN. 

The USDMXN is particularly noteworthy today as the cross has recently moved back above the 20 handle to trade at a 15-month high. The USD strength is only part of the reason behind the large move here, with the majority of it being down to weakness in the Peso. The MXN depreciation has likely come about due to comments from White House economic adviser Larry Kudlow, who suggested that the US could engage in separate trade talks with Mexico and Canada as part of the NAFTA negotiations.

 USDMXN has accelerated to the upside after breaking above 19.95 to trade at its highest level since February last year. Source: xStation

Kudlow told Fox News that President Trump is now “seriously considering” bilateral trade talks with Mexico and Canada but also stated that the US will not pull out of NAFTA. The speech came just hours after Mexico announced a tariff on the US, with pork leg and shoulder imports to face a 20% tax – Mexico is the US’s biggest market for the product. The move seemed to be an attempt to reciprocate US tariffs recently imposed on steel and aluminium imports from several of its closest allies including Mexico.