Greenback tumbles on Fed division
The US dollar fell from 15-month highs after this morning’s Federal Reserve decision revealed a market-spooking split.
Three Fed board members called for a rate hike, but newly installed Fed Chair Kevin Warsh pushed back against those demands.
Markets were unsettled by the news, with long-term US bond yields rising as the key 30-year yield jumped from 5.08% to 5.20%, the highest level since before the Global Financial Crisis. Rising long-term bond yields can be a sign of increasing inflation fears.
European markets performed best, with EUR/USD up 0.7%.
The British pound was stronger ahead of tonight’s Bank of England decision, with GBP/USD up 0.6%.
NZD/USD gained 0.2%, while AUD/USD fell 0.3%, with the Aussie underperforming after yesterday’s inflation reading.
Aussie dollar slips as inflation cools
Australia’s Q2 inflation came in softer than expected, reducing the likelihood of any near-term policy tightening.
Headline CPI rose 0.6% q/q versus forecasts of 0.7%, while trimmed mean CPI increased 0.8% q/q and 3.6% y/y, both below market expectations. Following the release, expectations for an August rate increase fell sharply, with only about 2.5bp priced in, compared with around 6bp beforehand.
The Australian dollar weakened, with AUD/USD falling to a two-week low. Immediate resistance is at the 21-day EMA of 0.6975, followed by the 50-day EMA at 0.7003. Key support remains at the psychological 0.6900 level. AUD/NZD also slipped to one-week lows, while AUD/CNY touched a two-week low.
Japanese yen leads Asia FX gains on wage growth
Japan took another step towards higher wage growth after a labour ministry advisory panel recommended increasing the nationwide average minimum wage by 4.9% to JPY1,176 per hour this fiscal year.
Although smaller than last year’s record 6.3% increase, the JPY55 hourly rise would still mark the second-largest gain on record. Continued growth in minimum wages points to resilient household incomes and supports the Bank of Japan’s view that sustained pay increases can help strengthen domestic spending.
USD/JPY fell 0.3% in line with USD weakness across Asia.
Elsewhere in APAC FX, USD/SGD remains around 3% above its 28 January low of 1.2586. Initial support is located at the 50-day EMA of 1.2884, followed by the 100-day EMA at 1.2853. Resistance is seen near the psychological 1.2950 level.
USD/CNH fell 0.2%, with the pair now back at major support around 6.75.
Aussie lower after Iran attack
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 27 – 31 July
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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.
