Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
FX on edge ahead of debate
Global FX markets were on edge overnight ahead of potentially market-moving events with the US presidential debate and US inflation release all due in the next 24 hours.
Vice President Kamala Harris and former President Donald Trump face-off at 11.00am AEST in what is currently their only scheduled televised debate. According to Real Clear Politics, the overall race remains incredibly tight, with Trump at 47.3% versus Harris at 48.4%, although the race appears closer in key battleground states.
US equities mostly edged higher overnight with the US dollar also gaining.
The Australian dollar was mostly weaker as fears about a slowdown in China pressured regional markets with, mostly notably, crude oil falling to three-year lows with WTI crude hitting a low of USD65.27 overnight. The AUD/USD lost 0.2% as it hit the lowest level since 16 August.
The kiwi outperformed with the NZD/USD up 0.1% although the pair remains broadly stuck near three-week lows.
In Asia, the greenback was mostly lower, with the USD/JPY down 0.5%.
The USD/SGD fell 0.1% while the USD/CNH was higher, up 0.2%, as worries about the Chinese economy hit the yuan.
USD CPI key for Fed
Looking ahead to tonight’s CPI reading, August’s core CPI inflation rate most likely stayed unchanged. We’re looking for the number to be circa 0.17% m-o-m.
The short bounce in July is anticipated to be reversed as rent and owners’ equivalent rent inflation, which surprised to the upside in July, likely eased to 0.28% and to 0.29%, respectively.
August saw a potential slowing of the rate of falls in airline rates and used car prices. The negative effect from reduced rent inflation will be countered by less of a drag from those volatile components.
Most recently, the USD has benefited from the fact that global growth has shown a shift towards a downward trend – risk aversion has supported the US dollar.
KRW showing signs of life
As a result of slower hiring rates combined with an increase in the labor supply, we’re looking for the South Korean unemployment rate to marginally rise to 2.6% in August from 2.5% in July.
Strong employment increases in the service industries were probably bolstered by seasonal demand from the tourist industry.
However, it’s possible that additional jobs were lost in the construction industry due to unfavorable weather and continuing project finance restructuring, balancing employment growth in the services sector.
We are more positive about KRW due to the anticipated change in the Fed’s monetary policy. This is because stock inflows should resume owing to a more risk-positive mindset in addition to the basic balance’s continuous improvement.
Oil and yields at lows – bad signs for growth
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 9 – 14 September
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.
Have a question? [email protected]
