Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
US shares boost greenback, weigh on others
The US dollar extended its rebound from 14-month lows overnight helped by a recovery in US shares.
US shares, as measured by the benchmark S&P 500 index, suffered their worst weekly loss in 18 months last week, falling 4.2%, but recovered on Monday with the index up 1.2%.
The Dow Jones and Nasdaq also climbed 1.2%.
In FX markets, most major currencies fell versus the USD.
The AUD/USD fell 0.1% while NZD/USD fell 0.4%.
In Asia, the USD/JPY gained 0.4%, USD/SGD climbed 0.2% while USD/CNH jumped 0.4%.
USD higher ahead of NFIB survey, CPI
The US dollar was higher ahead of tonight’s key confidence numbers and Wednesday’s all-important US inflation reading.
The NFIB small business confidence index looks likely to continue its current upward trend in August, perhaps ticking up.
Expected rate cuts and lower energy costs were probably tailwinds.
Because of the uncertainty surrounding the election, intentions to undertake capital expenditures probably remained muted even if the uncertainty index increased over the month.
With the USD rebounding from levels near major two-year support, and moving into a short-term uptrend, the greenback might see further recovery in the near term, although next week’s Federal Reserve decision is likely to re-inject volatility back into the market.
China trade balance resilient amid global tech uptick
From China, the focus is on today’s trade balance numbers. Despite a significantly larger base, we anticipate that export growth in USD terms will be relatively strong in August, rising from 7.0% in July to 6.6% year over year.
Based on the worldwide technological increase, the underlying export momentum most likely remained generally strong.
Import growth looks likely to slow down to 1.7% y-o-y in August from 7.2% in July.
A significant narrowing of the CNY-CNH market basis has occurred, and USD/CNY has returned to the middle of recent ranges due to the growing anticipation of a Fed pivot.
We are still mostly negative towards the CNY.
USD index recovers from 14-month lows
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 9 – 14 September
All times AEST
*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.
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