US inflation makes Fed hike more likely
The US dollar hit a 10-day high after Friday’s US inflation report came in broadly in line with expectations, causing markets to become more confident about a Federal Reserve rate hike this week.
The Fed meets on Thursday APAC time, and financial markets see an 88% chance of a hike according to Bloomberg pricing.
US headline annual inflation was reported at 3.4%, while core inflation came in at 2.4%.
The greenback’s biggest gains were in Europe, with USD/CHF up 0.5%, while EUR/USD fell 0.1%. GBP/USD was unchanged.
The Aussie and kiwi were stronger, however, with AUD/USD up 0.2% and NZD/USD up 0.3%.
In Asia, USD/JPY fell 0.5%, bucking the stronger US dollar trend as the pair extended its post-intervention sell-off. USD/SGD and USD/CNH both fell 0.1%.
New Zealand factories ease but growth endures
New Zealand’s manufacturing activity softened in August, with the index easing to 53.1 from 54.3. However, it remained above its long-run average of 52.5, signalling continued expansion. Four of five components improved, led by finished stocks at 56.4, followed by new orders at 54.9 and production at 54.2. Employment was steady at 50. Businesses flagged higher costs and uncertainty surrounding geopolitical tensions and the upcoming election, but overall activity remains resilient.
For NZD/USD, first resistance is the 100-day EMA at 0.5850, followed by the 50-day EMA at 0.5861 and the 21-day EMA at 0.5874. On the downside, support is located at 0.5800. Meanwhile, NZD/EUR has fallen to a two-month low.
Central bank super-week
Three major rate decisions headline an event-packed week. The Federal Reserve leads on Thursday, with markets pricing no change at 3.50%-3.75%, though guidance will steer dollar direction into year-end. The Bank of England follows on Thursday evening, also expected to hold at 3.75% as it weighs sticky UK inflation. The Bank of Japan rounds out Friday, where a widely anticipated move to 1.25% could fuel further yen strength.
Price data dominates the calendar. Canada opens Monday, with CPI seen holding near 3.0%. Japan’s national CPI closes the week on Friday, where headline and core readings are both expected to firm, reinforcing the BoJ’s tightening bias and adding to yen support.
China’s data dump on Tuesday anchors the region, with retail sales and industrial production both forecast to improve modestly, providing a key gauge for regional risk sentiment. New Zealand delivers Q3 GDP on Thursday, where a sharp slowdown to 0.1% q/q is expected, keeping the kiwi vulnerable. US retail sales on Wednesday will test consumer resilience after the previous soft print, while US industrial production closes out Friday.
USD mostly higher ahead of Fed
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 14 to 18 September
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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.
