Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
US stock drop driven by tech stocks
The Australian and New Zealand dollars were the hardest hit overnight as losses in US shares accelerated causing risk-sentiment to turn sharply negative.
The S&P 500 fell 2.3% while the tech-focused Nasdaq lost a massive 3.7% — both markets suffered their largest one-day losses since last 2022. The losses were driven by ongoing falls in technology leaders as the so-called “Magnificent Seven” extended losses.
The commodity currencies were also pressured after the Bank of Canada cut interest rates by 25bps to 4.50% in its second-consecutive easing.
The AUD/USD fell 0.5% while the NZD/USD lost 0.3%.
The USD/JPY also continued to react to the losses in sharemarkets as the pair fell 1.1%.
The European currencies performed better, however.
Euro gains limited by growth concerns
The euro was broadly steady overnight with the EUR/USD down only 0.2%.
Looking to upcoming lending data, May’s net lending was positive, mostly because of corporate lending.
May saw a negative net mortgage lending balance and sluggish consumer credit. While company lending may show a decline, the ECB’s most recent surveys on lending indicate that mortgage lending is expected to increase in June.
We still believe that the EUR/USD price increase will be restrained in the absence of growth – and the impetus for regional growth appears to be fading.
While recently steady, the euro might struggle to produce further gains, with EUR/USD seemingly whiplashed across its key trend support at 1.0800 and key resistance at 1.1000.
Sterling supported despite recent slip
The British pound was steady with the GBP/USD flat overnight.
In July, the CBI releases the quarterly and monthly surveys. June saw a notable improvement in the monthly orders balance, although some payback is not out of the ordinary.
In the June poll, the output price expectations balance increased while the production price balance stayed positive. The pricing balance will be closely examined for any indication that increasing freight costs are being passed forward.
The GBP/USD is in a short-term down trend with targets back towards its key support level of 50-day EMA trend line around 1.2800, but the GBP might be more resilient versus other key currencies.
US share losses hit APAC FX
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 22 – 27 July
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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