Written by Steven Dooley and Shier Lee Lim
US labour market keeps pushing greenback higher
The greenback was higher overnight – shaking off its recent two-day loss – with the USD index back near three-month highs.
The US dollar was boosted again by stronger jobs numbers with the weekly unemployment claims down from 224k last week to 218k this week.
In Europe, key markets were steady, with the EUR/USD and GBP/USD both flat.
The greenback was stronger in Asia, with the USD/JPY up 0.8% and USD/SGD up 0.3%. The USD/CNH was flat.
The AUD/USD fell 0.4% as it neared three-month lows. The NZD/USD lost 0.3%.
CPI revisions seen as key by Fed
Cited by Federal Reserve chair Jerome Powell as potentially the most important release in the near term, seasonally adjusted CPI will be revised by the Bureau of Labor Statistics, resulting in retroactive modifications for the previous five years.
The second half of last year’s monthly core CPI inflation was probably revised higher due to yearly changes to seasonal adjustment components.
The amount of modifications, though, will probably be minimal. We anticipate that as of December 2023, the annualized three- and six-month core CPI inflation rates will both be revised up by 0.1 percentage points due to the changes. Furthermore, we anticipate that Q4 2023 will see very little change in core PCE inflation. Overall, it is doubtful that the yearly changes to the CPI would significantly alter the recent pattern of disinflation.
Even while there are still some rather good stories that might aid certain local APAC FX, the USD should continue to be largely supported in the near future.
Norway CPI due
Traditionally seen as a benchmark for open, exposed economics, we’re looking for a further fall in Norway’s CPI-ATE (underlying inflation) from 5.5% to 5.3% and a decline in Norwegian headline CPI inflation from 4.8% in December to 4.6% in January.
This compares to 0.1pp lower core inflation and 0.2pp lower headline inflation predicted by Norges Bank. Based on high-frequency Nord Pool data, we anticipate a 2.3% month-over-month decrease in power costs and a 3.3% month-over-month increase in gasoline prices.
We are mainly negative on the NOK in the short term as expectations grow for rate cuts.
USD gains after jobs
Table: seven-day rolling currency trends and trading ranges (apologies, full table not available today)
Key global risk events
Calendar: 5 – 10 February
All times AEDT
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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.
