Written by Steven Dooley and Shier Lee Lim
China’s “Two Sessions” meetings in focus
Global markets were more cautious overnight with the Australian and NZ dollars the major underperformer ahead of key policy meetings in China.
The Chinese People’s Political Consultative Conference began on Monday while the National People’s Congress begins on Tuesday. Financial markets expect to hear details about 2024 GDP targets on Tuesday.
The NZ dollar led losses with the NZD/USD down 0.3%.
The Aussie was also weak overnight with the AUD/USD down 0.2% and the AUD/GBP losing 0.5%.
European currencies were mainly stronger with the EUR/USD up 0.2% and GBP/USD up 0.3%. The European Central Bank meets later this week.
FX markets were mixed in Asia – the USD/JPY was up 0.2%, USD/SGD fell 0.1% and USD/CNH was flat.
US JOLTS due tonight
The US job openings and labour turnover series (JOLTS) is due later this week ahead of the all-important US non-farm payrolls due on Friday. We anticipate a decrease in job vacancies to 8850k in January. This would indicate a decrease in the ratio of open positions to jobless workers to 1.44, down from 1.46, in conjunction with the most recent employment data.
After a startling drop in November, labour turnover steadied in December.
In the foreseeable future, employment and resignation rates should be steady and somewhat below their prepandemic norms. These metrics typically show steady wage growth, so the recent decline should cheer Fed policymakers as they increase their confidence that inflation is headed back toward the 2% objective.
We continue to believe that the Fed will remain higher for longer in 2024, that the US yield curve will not compress as substantially as it has in previous cutting cycles, and that the USD will continue to be seen as a “yield” in the global economy. This can support the USD.
GBP at highs ahead of BRC
The GBP/USD was one of the strongest major markets overnight with the pair at one-month highs.
The UK British Retail Sales Consortium retail sales monitor for February is due today. The pace of loss in real terms decreased in January despite a slowdown in the measure of nominal retail sales due to a reduced rate of shop price inflation.
Over the past three years, retail sales volumes have declined due to both the overall weakness in consumer spending and the shift by families to revert to spending on services rather than products. In the next months, consumer spending and retail sales growth should rebound due to lower interest rates, inflation, growing real earnings, and robust labour and housing markets.
Overall, we continue to believe that there is a route for wage growth and inflation in the UK to normalize, which will enable the market to price in more rate reduction in 2025 and weaken the yield support the GBP has received. If so, the GBP’s recent strength might be only short lived.
Aussie, kiwi underperform
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 4 – 9 March
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.
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