Aussie, kiwi near highs
The US dollar started the new week at two-month lows after the July jobs report missed expectations on Friday.
The July report showed a 23k decline in employment, compared with expectations for an 85k increase.
The USD index fell to its lowest level since 15 June.
The Aussie led gains, with AUD/USD up 0.5%. The AUD/USD traded to two-month highs.
The kiwi was also higher, with NZD/USD up 0.4%. The kiwi also reached two-month highs.
In Asia, USD/SGD fell 0.4%, while USD/CNH fell 0.1%.
Japan spending slump puts rate move in doubt
Japan’s household spending weakened for a seventh straight month in June, highlighting ongoing caution among consumers. Real household spending fell 3.3% y/y, missing expectations for a 1.0% increase, while seasonally adjusted spending dropped 6.4% m/m, significantly worse than the forecast 3.1% decline.
The weak reading came despite real wages rising 1.6% for a sixth consecutive month, indicating that stronger pay has yet to translate into higher spending. As household consumption accounts for more than half of Japan’s economy, the data casts doubt on the strength of domestic demand and adds uncertainty about the Bank of Japan’s next policy move.
Markets are currently leaning towards an October rate increase.
USD/JPY has fallen about 3.4% from its 23 July high of 163.99. Initial resistance is near the 100-day EMA at 159.84, followed by the 21-day EMA at 160.45.
US inflation and the RBA in the spotlight
Wednesday’s July CPI is the week’s centrepiece, with consensus at 0.2% for both headline and core after June’s -0.4% and 0.0% readings. Annual headline CPI is expected to hold at 3.5%, while core CPI eases to 2.5% from 2.6%. Thursday’s PPI, seen at 0.2% headline and 0.3% core, completes the pipeline read.
We will be watching the cash rate decision at 2.30pm AEST, with the target rate sitting at 4.40%. The NAB business survey lands earlier that morning, with confidence last at -5.0 and conditions at 3.0, giving AUD/USD a domestic steer before US inflation risk hits midweek.
China’s July CPI, released on Sunday, is expected to slow to 0.8% from 1.0%, while PPI is expected to ease to 3.8% from 4.1%. Japan follows with June current account and trade figures on Monday, then July PPI on Thursday after 7.1% annual growth.
Singapore’s final 2Q GDP on Tuesday and the UK’s preliminary 2Q reading on Thursday frame the growth outlook. The week closes with the second estimate of Eurozone 2Q GDP, US retail sales, expected to rise 0.3%, and Michigan consumer sentiment, seen slipping to 53.8 from 55.2.
Aussie, kiwi near top of trading ranges
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 9 – 15 August
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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.
