Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Markets pause selling as US inflation cools
Global markets calmed overnight after a month-long sell-off saw the benchmark US S&P 500 fall more than 10% from recent highs – one definition of a correction – with US tech stocks falling even further.
Markets were helped higher overnight by a lower-than-expected US inflation reading.
Headline annual inflation fell from 3.0% in January to 2.8% in February while the core measure dropped from 3.3% to 3.1%. A jump in inflation in the January report had spooked markets last month.
The US’s S&P 500 climbed 0.5% overnight while the tech-focused Nasdaq gained 1.2%. European stocks also gained.
The US dollar had recently fallen in line with US stockmarket weakness as markets worried about the potential for a US economic slowdown.
Overnight, however, the greenback gained, with the USD index climbing from four-month lows. There remains the potential for a broader reversal higher as momentum indicators, like the relative strength index, signal the recent move lower in the greenback is stretched.
The Australian outperformed in line with gains in equity markets. The AUD/USD climbed 0.5% but remains within the trading range between 0.6200 and 0.6400.
The USD/SGD and USD/CNH both climbed from lows in line with US dollar strength,
Euro slips ahead of industrial production
The euro was mostly weaker overnight as it retraced some of last week’s record-breaking gains.
Today, the industrial production in the Euro region will be announced at 21:00 AEDT.
We forecast that in January, industrial production in the euro region will decrease by 0.1% month over month.
For now, the EUR/USD maintains its positive trend despite weak Eurozone industrial production, as the pair remains supported above the critical 1.05–1.06 level.
Market focus now shifts to resistance near the 1.1276 July 2023 peak, with momentum favouring further upside.
However, weaker European economic data could spark near-term volatility.
Last week, the EUR outperformed notably thanks to fiscal optimism on German military spending would boost demand.
For EUR/SGD, next strong key weekly resistance at 200-day EMA of 1.4654 — the best level for EUR sellers since July 2022.
Kiwi pressured as credit card spending falls
The NZD/USD gained 0.2% yesterday but underperformed versus the Australian dollar.
New Zealand’s February credit card sales reported yesterday, dropping 4.2% year over year, due to a weak economy and a decline in foreign travel.
Core retail sales, which do not include vehicle and gasoline, decreased 3.1%. According to Retail NZ, foreign travel typically peaks in February, and with arrivals at around 80% of pre-COVID levels, brick and mortar stores are suffering from the decreased foot traffic.
NZD/USD is trading within the 30-day tight trading range between 0.56 and 0.58, as declining domestic retail sales weigh on the kiwi.
The pair remains sensitive to external factors, with risk sentiment playing a pivotal role.
Sustained weakness in New Zealand’s domestic economy could increase downside pressure.
Any move above the recent trading range in NZD/USD could test the daily 200-day EMA resistance of 0.5870.
Greenback climbs from four-month lows
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 10 – 15 March
All times AEDT
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*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.
