Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Greenback extends losses
The greenback, as measured by the USD index, fell to new 13-month lows overnight as its recent sharp move lower continued.
The USD index is down 2.6% over the last two weeks and down 5.3% over the last two months.
Overnight, a poor showing from the Richmond manufacturing index was balanced out by a stronger consumer confidence reading.
Financial markets are still focused on the potential for US Federal Reserve rate cuts with the US two-year bond yield falling to 3.89% overnight – near the lowest closing level in 16 months (at 3.84%).
The kiwi led the gains with the NZD/USD up 0.8%.
The AUD/USD gained 0.3% ahead of today’s key monthly inflation reading.
In Asia, the USD/JPY slipped 0.5%, ending at the lowest closing level since 4 January.
The USD/SGD fell 0.2% – still holding above support at 1.3000 – while the USD/CNH was steady.
Aussie monthly CPI due at 11.30am AEST
According to our assessment, the July CPI index probably decreased from 3.8% in June to 3.6% y-o-y in July. Fuel prices decreased by over 2% month over month in July, and we anticipate a little decrease in rent and the cost of building new homes.
We do, however, recognize that given that inflation is higher than in other G10 nations and the central bank has not yet shifted its emphasis from inflation to growth, market players will probably be carefully monitoring it.
After hitting the lower end of the holding pattern during the early-Aug risk-off move, the AUD/USD pair now climbs back into the higher end of the range.
The pair could be nearing a short-term top pattern in the vicinity of the resistance zone between 0.6800 and 0.6900.
ECB M3 data may hint at credit conditions
Net lending increased in June to its greatest point since October 2022.
Recent polls on bank lending and the availability of financing for businesses indicate that credit conditions are either relaxing or are predicted to ease as a consequence of the financial system completely absorbing the ECB’s harsh tightening cycle and the ECB starting its easing cycle.
Is as a result, if the ECB’s reducing cycle continues, we can see a moderate but steady increase in net lending data throughout H2 2024.
The recent break to one-year highs has kept the short-term trend bias for EUR/USD optimistic for the time being. The breakout zone of 1.0949–1.0981 is the main source of support.
Kiwi leads gains
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 26 – 31 August
All times AEST
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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