In view of analysts at ANZ, the recent decline in the US ISM survey has focussed the market on US economic risks, with recession talk once again rising.

“In recent trading sessions this has also led to a broad under-performance of the USD, with currencies like the AUD managing to hold stable despite the recessionary fears pushing US equities lower. We do not think that this is a sustainable reason to get bearish on the USD. Indeed, we have found that the relative performance of the US industrial sector has been a poor predictor of the direction of the USD. Rather, the overall level of global growth, is the better predictor of the performance of the USD. We do not think that the recent shift is a harbinger for a period of more sustained under-performance of the USD, particularly against the more cyclical currencies. For that to manifest we would need to see more sure signs of a recovery in global growth, particularly outside the US.”