Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
USD turns sharply from 14-month lows
The US dollar turned sharply higher overnight as US sharemarkets fell on renewed tensions in the Middle East.
An escalation in fighting between Israel and Hezbollah saw a “flight to safety” with US shares lower, US bond yields higher and the US dollar favored.
The USD index jumped from 14-month lows to end 0.5% higher.
The AUD/USD and NZD/USD led losses with the Aussie down 1.1% and NZD/USD down 1.2%.
Jobless claims key for labor market cues
Away from geopolitical issues, the USD will also be focused on upcoming jobs data, with weekly unemployment claims due at 10.30pm AEST.
Last week saw a decline in both initial and ongoing claims as the labor market continues to improve.
We anticipate that some of the favorable summertime residual seasonality is starting to fade, and claims will probably continue to be strong in the upcoming days and weeks. Continuing claims, which will be issued this week, will serve as the non-farm payrolls reference period.
Increased carry drawdowns and a stronger USD would result from further loosening of the US labor markets or a recession, when growth worries would take center stage.
USD/SGD jumps ahead of industrial production figures
August’s industrial production (IP) growth will be 11.8% y-o-y, up from 1.8% in July, driven by the manufacturing of electronics and consistent with robust exports.
Sequentially speaking, this means that IP growth sharply increased to 10.1% before falling to -2.0% m-o-m seasonally adjusted.
The weaker dollar post China’s RRR cut saw Asian FX up, with USD/SGD hitting new ten-year lows, but the overnight recovery saw the USD/SGD reverse from those lows.
Aussie tumbles as USD stages recovery
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 23 – 28 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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