Global overview
The USD was mixed overnight but the most obvious moves were sharp reversals from three-month highs in the Aussie and the kiwi. Today, Malaysian GDP and US housing data will be in focus.
Aussie, kiwi pressured at resistance
The Australian and NZ dollars saw their recent gains disappear rapidly with technical resistance at the three-month highs suggesting this year’s downtrends – as measured by the 200-day moving average – for both markets remain in place.
The New Zealand dollar, which led the charge on the way up, fell the most, with the NZD/USD down 1.0% overnight.
The Australian dollar was weaker despite a stronger than expected result from the local jobs report. Australia added 55k new jobs – although mainly as part time – while the unemployment rate crept up from 3.6% to 3.7%.
The AUD/USD fell 0.6%.
In other markets, the USD was mixed, with the GBP/USD and EUR/USD both flat, while the USD/JPY lost 0.4%.
In Asia, the USD/SGD fell 0.2% while the USD/CNH lost 0.1%.
Malaysia GDP due
Malaysia real GDP and current account balance is due today. We expect lower services growth to drive poorer GDP growth in Q3, which will moderate from 2.9% in Q2 and fall short of the advance estimate of 3.3%.
This is partially due to high base effects from last year’s reopening as well as lackluster wholesale and retail trade. Furthermore, the level of industrial output remained low, which was consistent with the poor external demand and the ongoing soft electronics production.
This suggests a little improvement to 2.1% q-o-q from 1.5% sequentially. The improvement in the goods trade balance as a result of slower import growth is the primary reason we estimate the current account surplus to rise to MYR16.3 billion in Q3 from MYR9.1 billion in Q2.
Despite being inexpensive according to our FX valuation models and a long-term potential winner due to supply-chain diversification and semiconductor decoupling, the currency is still being hampered by corporates’ poor FX conversion ratio.
US housing to test greenback strength
US housing starts are due tonight. In October, housing starts most likely fell to 1330k, a 2.1% month-over-month dip. In light of the rise from last month, we anticipate a slowdown in single family starts. This would also align with the current trend of single-family permit moderating.
After the drop in multifamily permits last month, multifamily starts should also reduce, partially undoing the gain in starts from the previous month. It is probable that housing permits fell to 1420k, a 3.5% decrease.
After months of declining mood among house builders, single-family permits are probably going to decline. It is also expected that multifamily permits will decrease. In line with the declining confidence of multifamily builders, we anticipate that stricter financing rules will have an impact on multifamily development.
The USD’s recent strength is being complicated by macro concerns. Rising US rates and intensifying geopolitics are USD-bullish, while improving momentum in China and Europe and a less assertive Fed would typically be USD-bearish.
In the short term. our bias remains net optimistic USD. The USD could gain from increased demand for safe haven assets in foreign exchange due to rising rates, and negative yield-equity correlations.
Aussie, kiwi turn at highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 13 – 18 November
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.
