Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Consumer confidence steady as tech stocks rebound
US consumer confidence remained stable in June, with the Conference Board’s labour market differential showing improvement. This data kept US Treasury curves flatter during the session.
Megacap technology stocks bounced back, driving the Nasdaq Composite up 1% and the S&P 500 0.40% higher, despite increased yields at the front end of the US curve.
Most USD currency pairs continued to consolidate.
Australia’s CPI data release at 11:30 AEST on Wednesday is a key risk event. While AUDUSD long positions are favored, the pair has been range-bound between 0.6570 and 0.6715 since mid-May.
Key points:
- UST curves remained flat
- Nasdaq Composite: +1.3%
- S&P 500: +0.40%
- AUDUSD range: 0.6570 – 0.6715 (since mid-May)
Key event: Australia CPI data at 11:30 AEST on Wednesday
USD outlook tied to consumer confidence
New house sales probably decreased by 2.2% month over month to 620k in May from 634k in April. May saw a fall in single-family permits and a decline in mortgage applications for purchases.
Furthermore, the confidence of house builders declined in May as seen by the declines in the indices for current sales and potential purchasers. The number of people purchasing homes is being affected by rising mortgage rates as well as monetary policy uncertainties.
Given its recent connections to rates and the fact that other central banks have already started their easing cycles, the dollar is expected to remain fairly well-supported over the medium term.
Aussie poised to press higher as inflation looms
The Australian dollar has been well supported over the last two months as markets come to the realisation the Reserve Bank of Australia might be one of the last major central banks to cut interest rates. Today’s monthly inflation reading, due at 11.30am AEST, will be key.
The monthly Australian weighted CPI report hasn’t seen a decline since the December reading – a clear sign of how the pace of inflation decline has stalled. In fact, the reading has actually climbed over the last two months.
Financial markets are looking for another increase in the May CPI reading with a forecast rise from 3.6% in April to 3.8% in May (source: Refinitiv).
While this would be bad news for mortgage holders – elevated inflation means the RBA is less likely to cut interest rates – a higher reading could see the AUD climb.
The AUD/USD remains capped by the five-month highs at 0.6700, but a higher inflation reading might see the market move above this level.
In other markets, the Aussie has been better supported, with the AUD/EUR and AUD/CAD recently at one-year highs after both the European Central Bank and Bank of Canada cut interest rates this month.
AUD/JPY at highest since 1992
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 24 – 29 June
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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