Aussie touches 0.7000
The US dollar was weaker, while AUD/USD traded above 0.7000 for the first time in a month after cooler US inflation data. New Federal Reserve Chair Kevin Warsh also said recent inflation pressures would “not be permanent”.
After Tuesday night’s softer US CPI reading, last night’s US producer price index also came in below expectations. Annual PPI was reported at 5.5%, versus expectations of 6.2%.
The US dollar fell for a second consecutive day to hit one-month lows. The British pound and Swedish krona recorded the biggest gains across the G10.
AUD/USD gained 0.4% to trade at its highest level in a month.
NZD/USD gained 0.6% to reach five-week highs.
Softer US inflation supports Asian FX
Chicago Fed President Austan Goolsbee welcomed June’s softer US inflation data, pointing to encouraging progress in services prices. However, he cautioned against drawing firm conclusions from a single month of data, stressing that several months of similar readings would be needed before policymakers gain confidence that inflation is moving sustainably towards the 2% target.
Goolsbee also described the labour market as stable rather than strong, reinforcing a cautious policy stance as officials wait for more evidence that price pressures are easing.
Across Asia, softer US inflation has continued to support regional currencies.
USD/SGD is trading around 3% above its 28 January low of 1.2586. Support is located near the 50-day EMA at 1.2871, with additional support at the 100-day EMA of 1.2840. On the upside, the next key resistance level comes in at the psychological 1.2950 mark.
As highlighted previously, sellers of US dollars may look to take advantage of any rallies at current levels.
USD/CNH at more than a three-week low
China’s economy expanded 4.3% y/y in Q2, missing the 4.5% forecast and slowing from 5.0% in Q1. The reading also fell short of Beijing’s 4.5%-5.0% growth target, reinforcing expectations that policymakers could roll out fresh support measures at the July Politburo meeting.
June data painted a mixed picture. Retail sales rose 1.0% y/y and factory output increased 5.3%, both beating expectations. However, fixed-asset investment fell 5.7% y/y in the first half of the year. The property sector remains the biggest headwind, with developer spending down 18.0% y/y and home prices continuing to decline.
Even so, USD/CNH remains near its lowest level in more than three weeks and is trading just 0.3% above its low of 6.7539. A break above the 21-day EMA at 6.7876 could pave the way towards the 50-day EMA at 6.7971. On the downside, the next key support level sits at 6.7650.
Aussie trades to one-month highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: July 13-17
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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.
