Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Asian markets set for cautious open as investors await US jobs data
FX markets saw the US dollar weaken overnight, with the USD index down as Treasury curves flattened and equities climbed.
The USD/JPY pair is now eyeing the 162 level.
In Europe, sentiment improved as political maneuvering ahead of the French second-round election boosted markets. The Stoxx 50 rallied 1.2%.
The EUR/USD pushed higher but struggled to maintain levels above 1.0800 ahead of the French election this weekend.
We expect a quieter session due to the US holiday, with some risk reduction and pre-positioning ahead of Friday’s US jobs data.
Key events for today (SGT):
- 20:30 – US jobless claims
- 22:00 – US ISM services
- 22:15 – ECB’s Lagarde speaks
- 02:00 (Thu) – FOMC minutes
Sterling gains on carry flows, but Brexit risks linger
In recent months, the PMI for construction in the UK has increased significantly. While all three subsectors—commercial, civil engineering, and housing—have shown indications of recovery, commercial activity has expanded at the highest rate. According to the May press release, increasing new contracts and the beginning of previously postponed projects have resulted in an increase in new orders and business expectations.
Since the outbreak, sterling has increased in value, although this increase has been mostly driven by inflows linked to carry and rates momentum rather than a decline in the Brexit risk premium.
Swiss Franc’s safe-haven appeal may strengthen as US election near
We forecast 1.3% year-over-year growth in core inflation and a decline in CPI inflation in Switzerland. Based on our projections, core inflation is susceptible to negative shocks. We anticipate modest pricing pressures that are too great for key goods and services.
Due to the currency’s depreciation during the previous six months, core goods prices might see a little increase. In keeping with the SNB’s prediction issued before to its June meeting, average inflation throughout Q2 2024 would be 1.4% y-o-y if our forecast comes to pass.
Given CHF’s status as a safe haven, interest in selling it may decline as the US election draws nearer.
AUD/JPY at top end of the range
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 1 – 6 July
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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