Global overview
A better-than-expected result from the US labour market drove the greenback to a second day of gains. The Japanese yen and NZ dollar were the hardest hit. The Chinese yuan fell from five-month highs. With the US closed for the Thanksgiving holiday, focus shifts to today’s releases of PMI numbers – especially out of the French and German manufacturing sectors.
Greenback extends second day of gains
The US dollar extended its recent rebound after a better-than-expected result from the weekly unemployment claims series overnight.
Only 209k new claims were made last week – the lowest since mid-October – in another sign that the US labor market remains resilient.
However, other data was more mixed, with durable goods order seeing a large 5.4% decline versus the 3.2% fall expected.
The US dollar gained with the AUD/USD down 0.2% and NZD/USD down 0.4% as these markets extended reversals from three-month highs.
In other markets, the EUR/USD fell 0.2% while the GBP/USD fell 0.4%. The USD/JPY jumped 0.8%.
The Chinese yuan was the most notable mover as it gave up recent strength – the USD/CNH gained 0.3% as it climbed from five-month lows.
PMI numbers due
Today, all eyes are on the series of national PMI – purchasing manager index – numbers due.
The PMI series gives the most up-to-date reading of key economies with the vast major of key markets now stuck below 50 for both manufacturing and services sectors – a sign of economic contraction.
Australian numbers are due at 9.00am AEDT with the most recent figures seen at 48.2 for manufacturing and 47.9 for services.
With Japan and the US closed for public holidays, European PMI numbers take centre-stage, with French and German manufacturing recently falling to pandemic lows near 40.
Historically, PMI numbers have a large impact on the AUD and NZD – higher numbers are typically supportive. With the global composite manufacturing PMI languishing all year – the Aussie and kiwi have struggled too.
Singapore inflation, Bank Indonesia due today
We also have key regional market releases due today. In Singapore, core inflation looks likely to rise from 3.0% in September to 3.1% y-o-y in October due to a combination of higher energy prices, a subsequent increase in the inflation of food prices, and continued strong demand, particularly for services. Along with increased certificate of entitlement (COE) charges, headline inflation could also rise, from 4.1% to 4.5% year over year. This is mostly due to the steep increase in automobile prices.
In Indonesia, Bank Indonesia is expected to maintain its policy rate at 6%.
Specifically, the decrease in global rates and the apparent persistence of disinflation in the US will lead BI to attribute a reduced probability to future Fed rises, hence decreasing the need for it to follow suit. The goods trade surplus is still there, but domestic GDP growth shocked on the lower side.
Having said that, we anticipate that BI will emphasize in the policy statement that it will continue to be watchful for outside threats that might jeopardize FX stability, maintaining a hawkish tone. We put a 40% chance of a 25bp increase and a 60% chance of no change in our projection in the event that volatility in the world financial markets returns.
We are pessimistic about IDR due to the deteriorating external picture.
Chinese yuan pauses after strong run
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 20 – 25 November
All times AEDT
Have a question? [email protected]
*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.
