Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Aussie, kiwi jump, but rate cut risks remain
The Australian and New Zealand dollars reached the highest level in two months on Friday after a big miss from US retail sales.
US retail sales in January fell by a massive 0.9% – well down on the 0.2% fall forecast – a big drop from the 0.7% in December.
The greenback, as measured by the USD index, fell to its lowest level since 12 December.
The Australian and NZ dollars gained on the news with the AUD/USD up 0.5% to the best level since 17 December.
The NZD/USD gained 0.8% to hit the highest level since 18 December.
However, both the Aussie and NZD might face volatility this week with the Reserve Bank of Australia decision on Tuesday and the Reserve Bank of New Zealand decision on Wednesday.
USD/SGD hits two-month lows
In Asia, the USD was also weaker, with USD/SGD falling to the lowest level since 10 December.
Due to shifting calendar impacts from the CNY holidays, we anticipate Singapore’s non-oil domestic export (NODX) growth, which was reported today, to drop to -8.0% year over year in January from 9.0% in December.
Sequentially speaking, this means that NODX growth dropped from 1.7% to -1.7% m-o-m sa.
In January, the MAS shocked us by softening the slope. A further increase in international tariffs would have a detrimental effect on H2 growth and perhaps result in another lowering of the S$NEER policy band later this year.
Central banks, GDP and inflation in focus
This week’s economic calendar features crucial GDP and inflation readings across major economies.
On the inflation front, key CPI readings are due from multiple economies. The UK’s January inflation data will be closely watched, following December’s 2.5% YoY reading.
Several major central banks will announce policy decisions this week. The Reserve Bank of Australia meets on Tuesday, with markets expecting a cut in the cash rate to 4.10% from 4.35%.
The Reserve Bank of New Zealand follows on Wednesday, where consensus points to a reduction in the Official Cash Rate to 3.75% from 4.25%.
The release of the Federal Reserve meeting minutes will provide insights into the Fed’s January deliberations, particularly important given recent market movements.
The latter part of the week brings preliminary February PMI data from major economies. Japan, France, Germany, the Eurozone, UK, and US will all release manufacturing PMI readings, offering a fresh look at global industrial activity.
Current readings suggest continued manufacturing weakness in most regions, with the US being a notable exception at above the 50-mark expansion threshold.
USD extends recent sell-off across Asia
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 17 – 22 February
All times AEDT
Have a question? [email protected]
*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.
