Global overview
An unexpected drop in the US job opening and labor turnover series hit the greenback overnight as markets became less fearful of further Federal Reserve rate hikes. US shares surged. FX markets across Asia were boosted by a rally in Chinese shares. Today’s Australian inflation number will be key in determining the Reserve Bank of Australia’s next move.
Greenback falls from three-month highs
The US dollar was sharply lower overnight after a big drop in the job openings and labor turnover series (JOLTS) provided more evidence of a slowdown in the US employment market.
The monthly JOLTS number fell from 9.2mln in June to 8.8mln in July – the lowest level in over 18 months. Financial markets had forecast 9.2mln.
Historically, the broader trend in the JOLTS reading has reflected the performance of the key non-farm employment reading due on Friday. Tonight, the closely-watched ADP employment series, often seen as a preview of the NFP reading, is due.
Financial markets now only see a 14% chance of a hike at next month’s Fed meeting with two full rate cuts priced in by July next year.
US shares jumped on the news with the S&P 500 up 1.5%.
The USD dropped from three-month highs with the USD index down 0.5% overnight.
Shanghai rally boosts regional markets
Away from the US, markets were also boosted by a rebound in Chinese stocks yesterday.
Chinese stocks have been stronger this week after authorities halved stamp duty on stock trades over the weekend. The Shanghai Composite was up 1.2% yesterday as it extended its climb from nine-month lows.
The improved sentiment saw commodity prices rise across the region with copper up 1.0% to three-week highs and crude oil up 1.5% to one-week highs.
The improved sentiment saw the AUD/USD up 0.8% while the USD/CNY fell 0.2%.
Australian inflation due
In Australia, all eyes are on today’s critical monthly inflation reading.
Australian inflation has been falling, with the new monthly series down from 8.4% in December to 5.4% in June, but the rate remains well above the Reserve Bank of Australia’s 2-3% target.
Yesterday, incoming RBA governor Michelle Bullock delivered her first major speech since her appointment was announced, in a wide-ranging address that particularly focused on how climate change might impact the Australian economy, noting climate-driven supply constraints could drive price pressures.
Bullock also focused on the short-term fight against inflation – saying this remains the RBA’s main priority and warning the central bank is prepared to raise rates further to contain inflation.
USD index reverses from three-month highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 28 August – 2 September
All times AEST
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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.
