Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
US jobs key tonight
The Australian dollar was the hardest hit in APAC overnight as US shares continued to be hit by waves of selling as poor economic data and the June-quarter earnings season saw further disappointment.
The S&P 500 fell 1.4% while the Nasdaq lost 2.3% as US manufacturing PMI fell from 48.8 in June to 46.8 in July. Weekly jobless claims jumped.
After the close, Amazon and Intel earnings both missed expectations, leading to further losses in futures markets.
The AUD/USD fell 0.7% while the NZD/USD was flat. The USD/CNH gained 0.3% while the USD/SGD was flat.
In Europe, the British pound underperformed, with the GBP/USD down 0.9% after the Bank of England cut interest rates by 25bps to 5.00%.
Looking forward, the US’s July jobs report will be critical – a lower-than-expected number might see a further worsening in sentiment.
The market is looking for 175k jobs in July, a drop from 206k in the previous month. The unemployment rate is forecast to stay steady at 4.1%. The jobs report is due at 10.30pm AEST.
Swiss franc watches inflation print
The Swiss franc has been a clear outperformer in recent days as its safe-haven appeal drives gains as global sharemarkets fall.
Looking ahead to the upcoming inflation reading, in July, we anticipate 1.3% year-over-year headline inflation (same as in June) and 1.2% year-over-year core inflation.
Fuel prices are probably going to slightly decline, and we still think that the underlying momentum for inflation is weak.
Although recent data indicates that we do not anticipate a significant adjustment to healthcare prices every two years, we are anticipating a biannual adjustment that left the health CPI inflation unchanged on a month-over-month basis in January.
Rainy forecast for Korea’s CPI
Because of increased supply-side pressures brought on by heavy rainfall disrupting the supply of agricultural products and the government lowering tax benefits on retail fuel consumption, we anticipate headline inflation to rise to 2.6% y-o-y in July from 2.4% in June.
Nevertheless, core inflation is expected to stay at 2.1% year over year in July, unchanged from June, indicating that the underlying price momentum remained steady.
Nonetheless, given the persistently sticky price trends, core service price inflation most likely stayed above 2% year over year. While we anticipate the BOK to downplay the short-term spike in headline inflation brought on by unfavorable weather, fresh worries about supply-side factors might justify a more cautious approach to rate cuts.
The USD/KRW remains near two-year highs, and considering the National Pension Service (NPS) continues to purchase USD, we remain neutral on the Korean won with the market seemingly trapped under major resistance at 1400.
Aussie at lows ahead of US jobs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 29 July – 3 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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