Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Greenback extends gains
The US dollar was moderately higher overnight as the world’s most traded currency continued to recover from last week’s lows.
The USD index hit six-week lows after last week’s cooler US inflation reading caused markets to again expect the Federal Reserve to cut rates twice by the end of the year (source: CME Fedwatch). The news boosted equity markets and commodities.
The Aussie and kiwi were the hardest hit — giving up some of last week’s big gains with the AUD/USD and NZD/USD both down 0.4%.
In Europe, the euro was lower, while the GBP/USD was broadly flat.
The greenback recovered in Asia with USD/SGD up 0.1%, USD/CNH gaining 0.2% and USD/JPY up 0.4%.
RBA minutes in focus
After last month’s CPI surprise higher, there must surely have been some debate at the Reserve Bank of Australia whether or not to raise the cash rate further at the May meeting.
We’ll be looking for that detail in today’s minutes due at 11.30am AEST.
To determine how the RBA views the balance of risks, comments about the consumer sector’s weakening will be crucial.
Last week’s move higher in AUD/USD means resistance has moved to 0.6819–0.6901 while 0.6747 is seen as the downside target.
South Korea exports helping the won
We’ve seen a pick-up in industrial and export activity across Asia this year and we’ll be looking for further sign of this in today’s South Korean export numbers.
With fewer working days in May, we anticipate that export growth for the first 20 days of the month will decrease to 6.9% y-o-y from 11.1% in April.
The average daily export growth probably increased from 12.9% in April to 24% y-o-y in May, indicating a strengthening of the underlying momentum.
We anticipate a widespread rebound in the exports of automobiles, semiconductors, petroleum, and chemical items. The second quarter’s seasonally high demand for chemical goods and chips should drive robust export growth.
A few factors drive positivity towards the won: 1) the continuous wide export recovery; and 2) the company’s consistent equity inflows, which are supported by its corporate value-up program and solid electronic earnings.
USD steadily higher
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 20 – 24 May
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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