Global overview
The US dollar remained broadly near three-month highs despite easing overnight as key US bond yields continue to trade near post-GFC highs. The Australian dollar outperformed after a stronger retail sales number.
Fed uncertainty keeps yields elevated
Higher US bond yields continue to dominate markets after Friday night’s major speech from Federal Reserve chair Jerome Powell signaled the risk for US interest rates to remain higher for longer.
The benchmark US two-year bond yield remained broadly steady at 5.05% — near the highest level since the global financial crisis.
Powell said the fight against inflation still has a “long way to go” and echoed a recent theme from central bankers that the post-pandemic world has caused many economic models to become less effective in forecasting outcomes.
As Powell put it on Friday: “We are navigating by the stars under cloudy skies.”
USD continues to dominate in Asia
Across FX markets, the US dollar moderately eased from the three-month highs seen on Friday in the key USD index.
The EUR/USD and GBP/USD both gained 0.2% as both pairs climbed from two-month lows. The USD/JPY remained steady near nine-month highs.
Across regional markets, the USD/SGD was slightly higher, while the USD/CNY was flat.
The NZD/USD was also broadly steady at recent lows – the kiwi has been historically tied to US interest rates and the recent climb in US bond yields has seen the NZD underperform.
Australian retail easing, despite a good July
The Australian dollar received a small lift on Monday, up 0.5% at the close, after a better-than-expected reading from local retail sales, up 0.5% in July versus forecasts for a 0.2% gain.
While the month-on-month reading was better, this disguises the fact that Australian retail sales is clearly on a long-term trajectory lower. The 2.1% annual rate is the slowest pace of growth since the depths of Covid lockdowns in August 2021.
The Australian dollar will remain closely-watched today with the first major speech from Reserve Bank of Australia designate Michelle Bullock due at 5.40pm AEST.
Aussie higher after retail sales
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 28 August – 2 September
All times AEST
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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.
