Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Global risk rally weighs on greenback
The worldwide rally in global sharemarkets continued overnight with the benchmark S&P 500 hitting new all-time highs as last week’s jumbo-sized Federal Reserve rate cut and this week’s stimulus moves from Chinese authorities super-charged sentiment.
A strong US June-quarter GDP reading – at 3.0% in annual terms – and a further drop in US weekly unemployment claims also supported the optimism.
In FX markets, the Australian and NZ dollars led markets higher with the AUD/USD closing at the highest level since February 2023 while the NZD/USD traded back towards the year’s highs.
In Asia, the USD plunged further, with the USD/CNH dropping below 7.0000 for the first time since May 2023.
The USD/SGD was also sharply lower as it closed at the lowest level since October 2014.
GBP stronger as retail data looms
In Europe, the GBP/USD has been the standout performer, with the GBP/USD at the highest level since early 2022. The GBP has been stronger in most other markets although the AUD/GBP and NZD/GBP have recently rebounded from lows.
Looking ahead to tonight’s CBI realised sales figures, for the last three months, the headline balance has been below zero, averaging -31 as opposed to a long-run average of +16.
Although it improved from the survey estimates from last month, the September balance was still negative. Official retail sales have been on a very gradual ascent, while the BRC retail sales survey has been showing some signs of improvement.
Despite this, retailing has underperformed due to two factors: (i) a general decline in consumer expenditure and (ii) an increase in spending on services relative to products.
In GBP/USD, while the pair is above 1.30, the larger bull trend continues, with next resistance at 1.35.
Eurozone inflation in focus
The euro has also been stronger and inflation figures over the next few days might set the tone for further potential gains in the EUR.
We anticipate a significant offset in September in the inflation of French services due to the removal of increased bus and metro charges during the Olympic events.
French services inflation is predicted to increase from 3.6% y-o-y in August to 3.7% y-o-y in September, despite a lower underlying pace. From 2.2% in September, we anticipate that French headline inflation will drop to 2.1% y-o-y in September.
In the meanwhile, headline inflation in Spain is predicted to drop from 2.4% y-o-y in August to 1.8% y-o-y. The next week, on Tuesday, October 1st, the aggregate figures for the euro area are made public.
The FOMC meeting’s decision and the accompanying market movement indicate that EUR/USD might be supported from the 1.1000 level, providing a baseline for EUR in other markets.
Aussie back at highs as global shares rally
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 23 – 28 September
All times AEST
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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.
