Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
USD back near highs as US shares rally
The US dollar was mostly stronger on Thursday as new highs for US shares and this week’s more hawkish commentary from the Federal Reserve combined to boost the currency.
The USD index gained 0.5% as it returned to levels near one-month highs.
The stronger US dollar saw markets reverse from recent key levels.
Notably, the AUD/USD again turned from resistance at 0.6700, while NZD/USD reversed from the three-month highs at 0.6200.
In Asia, USD/SGD rebounded from major support at 1.3450.
JPY faces upside risks as BoJ turns to policy normalization
The Bank of Japan (BOJ) is due today with markets still focused on the ongoing process of policy normalisation in Japan.
Regarding the two areas that are most likely to garner notice, we anticipate that the Bank will make plans to cut back on its purchases of JGBs while maintaining its policy interest rate, or the uncollateralized overnight call rate.
Since domestic and speculative JPY selling pressures are unlikely to abate as long as BoJ is behind the curve, we are conscious of the upside risks from JPY.
GBP stronger for now, but inflation key
The GBP has been stronger in a number of markets – notably versus EUR, JPY and AUD – and today’s consumer inflation expectations number might provide further support.
Inflation rates to watch in this report include the current inflation rate (which was 6.1% y-o-y in Q1), the inflation rate predicted for the upcoming year (which was 3.0%), the inflation rate predicted for the year after that (which was 2.8%), and the longer term (which was 3.1% for the five years ahead).
In comparison to Q4 2023, all these figures decreased or stayed the same in Q1 2024. Given that real inflation is really dropping, more drops may be anticipated, which could eventually weigh on the GBP.
USD stages comeback
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 10 – 15 June
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.
Have a question? [email protected]
