USD higher after Fed minutes
The US dollar was higher overnight after the US Federal Reserve minutes pointed to further rate hikes with most policymakers looking for US interest rates to climb to 5.60% or higher by the end of the year.
According to money markets, the probability for a 25-basis point increase – to a new range of 5.25% – 5.50% on 27 July – is now seen at 87% (source: Refinitiv).
US bond yields climbed and shares fell on the news. The Dow Jones lost 0.4%. The US dollar gained.
The AUD/USD fell 0.6%. The Aussie was weaker in most other markets with the AUD/GBP leading losses away from the US dollar.
The NZD/USD fell 0.2% as it reversed from two-week highs. The USD/SGD climbed 0.3% while the USD/CNH jumped 0.4
Chinese services drop hits sentiment
FX markets across the region were also hit by a disappointing result from yesterday’s Chinese Caixin services PMI number. (The media group Caixin provides a private-sector reading of the Chinese economy.)
While Chinese manufacturing has recently underperformed, services, like travel, education and entertainment, had been well supported as China emerged from its 2022 lockdowns.
Yesterday, however, services PMI took a sharp turn lower, falling from 57.1 in May to 53.9 in June.
The news sparked fears of broader weakness across China and hit sentiment across the region. The AUD was the hardest hit.
US jobs in focus
The next 48 hours sees a close focus on US employment with the tight US labour market also driving worries about further rate hikes.
Globally, labour markets have become increasingly stretched since the pandemic, with many workers leaving the jobs market while a slowdown in migration affected supply. As labour markets tighten, wages grow higher, causing inflation to become more problematic.
In the US, tonight’s ADP employment, weekly unemployment claims and JOLTS job opening series will all be watched ahead of tomorrow night’s all-important US non-farm payrolls number.
Aussie, kiwi turn from highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 3 – 7 July
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.
