USD index climbs to two-week highs
The US dollar continued its recent recovery with the USD index reaching a two-week high overnight.
Global equities have paused after a monster rally in November as investors turn cautious ahead of Friday’s all-important US jobs report.
Financial markets have rallied on hopes the US Federal Reserve has reached an end to its rate-hiking cycle. In fact, markets now see the Fed cutting rates by 125 points over the next 12 months (source: Refinitiv).
But a stronger jobs report on Friday might dash those rate-cut hopes and so markets have turned more wary – and pushed the USD higher.
The EUR/USD fell 0.4% while the GBP/USD lost 0.3%. The USD/JPY was flat.
The Australian dollar saw the biggest losses – with the AUD/USD down 1.0% – after the Reserve bank of Australia kept interest rates on hold at 4.35% yesterday.
Asian FX mostly lower
Asian FX markets have lost ground over the last few days. Tawain inflation is due today.November’s CPI inflation is likely to drop to 3.0% year over year from 3.1% in October due to reduced oil and vegetable costs, which most likely steadied following a spike brought on by a typhoon.
Core inflation is forecast to drop from 2.5% y-o-y in October to 2.4% y-o-y in November due to the probable moderating effect of consumption on service price inflation. Although the pace seems to be slower than the CBC’s predictions, we anticipate inflation to eventually revert to the 2% objective.
Reduced geopolitical tensions constructive for risk sentiment and positive for TWD, but premature to bet outright on sustainable de-escalation.
US trade due
US trade numbers are due tonight.The trade deficit is predicted to increase from -$61.5 billion in September to -$65.0 billion in October.
Unexpectedly, the advance goods trade deficit in October increased to -$89.8 billion from -$86.8 billion, accounting for the majority of our projection. However, we also anticipate that October’s increase in net foreign travel consumption contributed to a little drop in the services trade surplus.
The greenback’s recent rally might continue thanks to increased demand for safe haven assets in foreign exchange if financial markets see further selling.
USD extends rebound
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 4 – 9 December
All times AEDT
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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.
