USD gains short lived
Global markets climbed on Monday, with US equities gaining about 1.0% after Iran’s retaliatory strikes on US assets were seen as largely symbolic.
Iran reportedly gave advance notice to the US ahead of 19 missile launches targeting the Al Udeid Air Base in Qatar. All but one of the missiles were intercepted with the other causing no damage.
The measured response was viewed as a step toward de-escalation. Oil prices tumbled 7.2%, falling back below USD 60 per barrel.
Also impacting markets, commentary from President Trump-aligned Federal Reserve board members Christopher Waller last week and Michelle Bowman overnight, who have both now called for the Fed to cut rates at its next meeting on 31 July (APAC time).
This shift in expectations, combined with easing geopolitical tensions, led to a drop in the US dollar.
The European markets performed best with the EUR/USD and GBP/USD up 0.5%.
The recovery was more muted in the Aussie and kiwi – both up 0.1% but recovering well from earlier lows.
In Asia, the USD/JPY ended flat, easing from earlier highs. The USD/SGD closed 0.2% higher while USD/CNH fell 0.1%.
Aussie supported by services-led PMI rise
Australia’s economy showed modest improvement in June.
The flash S&P Global Composite PMI rose to 51.2 from 50.5, driven by stronger activity in the services sector.
Manufacturing held steady at 51.0, while the services index climbed to a three-month high of 51.3.
Solid domestic demand helped offset weaker export activity, and business confidence reached its highest level in five months.
The Australian dollar dipped briefly but found support at its 200-day moving average of 0.6423.
For momentum to continue, the currency would need to break above its 21-day average of 0.6473.
A move higher could bring the June 16 peak of 0.6552 back into focus.
Hong Kong dollar under pressure as Fed holds rates
In Asia, the Hong Kong dollar remains near its weakest levels.
Short-term interest rates in Hong Kong are aligning more closely with China’s lower rates rather than with US rates, adding pressure to the currency.
With China grappling with deflation and unlikely to raise rates soon, the US dollar-Hong Kong dollar pair is expected to stay near the top of its range.
The pair is currently testing the 7.85 peg, with support levels seen near the 21-day and 50-day moving averages at 7.8412 and 7.8194.
USD reverses gains
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 23 – 28 June
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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.
