Written by Steven Dooley, Head of Market Insights
Global overview
The US dollar remains dominant with global shares seeing another heavy night of selling. The Aussie dollar was weaker despite higher inflation with markets now forecasting a 60% chance of an RBA rate hike next month (source: Refintiv).
Global markets stay grim
Global market sentiment remained grim overnight with US shares tumbling after a big earnings miss from Alphabet – owner of Google – added to the worries about higher interest rates.
Near the close of US trading, the S&P 500 was down 1.5% while the tech-focused Nasdaq was down 2.5%.
The sell-off hit the Australian dollar with the AUD/USD down 0.8%.
The Aussie had been initially higher after headline annual inflation, while slightly below forecasts at 5.3% for the September quarter, remained elevated and caused markets to worry about another rate hike when the Reserve Bank of Australia meets on 7 November.
The NZD/USD was also lower, down 0.7%.
Asia growth in focus
In Asia, key markets were also lower, with the Singapore dollar down 0.3% versus the US dollar while the Chinese yuan fell 0.2%.
Today, Singapore industrial production is due.The market anticipates better IP growth in September, down 2.6% YoY compared with August’s 12.1% fall YoY, which is less than what the advance Q3 GDP estimate suggests.
This suggests that IP growth improved sequentially aided by an uptick in electronics production after August’s startling decline.
ECB due
The European Central Bank decision is due tonight with the euro mostly lower this week after poor PMI numbers released on Tuesday.
We don’t anticipate a raise from the ECB at its October meeting. Rather, the ECB looks likely to maintain the status quo at all three of the major policy rates, which would keep the deposit rate at 4.00%.
Neither the active sales of the Asset Purchase Programs (APP) nor the tapering of the reinvestments from the Pandemic Emergency Purchase Program (PEPP) are anticipated to be announced by the ECB at the September meeting, according to our base scenario.
Furthermore, no statement about the payment of excess reserves or government deposits is anticipated under our base case.
Global sell-off hits Aussie, kiwi
Table: seven-day rolling currency trends and trading ranges (apologies, the full table is not available today)
Key global risk events
Calendar: 23 – 28 October
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.
