Global overview
The US dollar continued to trade higher with the USD index at new six-month highs overnight thanks to stronger US economic data. The EUR and GBP underperformed. Chinese trade data provided some hope for a recovery.
Fed fears weigh on markets
The US dollar extended this week’s gains overnight after more strong data with employment and wages cost numbers both remaining elevated.
The tight US labour market continues to drive expectations that the US Federal Reserve might not yet be done with interest rates hikes.
US ten-year bond yields remain near post-GFC highs at 4.30% although yields did ease later in the session.
US shares, which have been broadly pressured since mid-July, were weaker again overnight on the Fed hike worries with the S&P500 down 0.3% and the Nasdaq dropping 0.7%.
Euro, GBP under pressure
The stronger US dollar drove losses in other major markets with the European currencies hardest hit.
The EUR/USD and GBP/USD both fell 0.3%.
The euro and British pound have both weakened as rate hike expectations for the European Central Bank and Bank of England have eased, but these markets have also been driven by the broader malaise that has weighed on markets.
Falling US – and global share prices – suggest that part of the EUR and GBP’s gains in the first half of the year were driven by speculative activity. A further sell-off in markets might see more losses in these currencies.
China trade sees small improvement
Across Asia, the focus was on yesterday’s Chinese trade data, which produced a rare better-than-expected result from the world’s second-largest economy, albeit from a low base.
While both exports and imports remained in decline, the 8.8% fall in year-on-year exports (versus 9.2% forecast) and the 7.3% drop in imports (against 9.0% forecast), sparked hopes that the collapse in Chinese trade might be nearing a bottom.
The news provided support to Australian and New Zealand dollars, with both currencies broadly flat versus the US dollar.
The Chinese yuan and Singapore dollar both continued to lose ground, however.
Aussie supported by China trade hopes
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 4 – 8 September
All times AEST
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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.
