Global overview
The US dollar was higher for the tenth week in a row as worries about further rate hikes hit market sentiment. The Bank of Japan, however, pushed back against market speculation of a shift in policy. US PCE inflation, due Friday night, is likely to be the highlight this week.
Global nerves boost US dollar
US shares ended lower on Friday ending a tough week for global sentiment as markets reacted to the Federal Reserve’s ongoing “higher for longer” mantra.
On Friday, the S&P 500 fell 0.2% while the tech-focused Nasdaq was broadly flat. Earlier in the week, key US markets saw heavy selling after Thursday morning’s Federal Reserve statement.
In fact, the selldown in the S&P 500 has seen the index break to recent lows, a technical move that signals a short-term downtrend.
In FX markets, these global nerves were seen in a tenth-straight week of gains for the USD index. This week, durable goods are due on Wednesday night, Fed chair Jerome Powell speaks on Thursday night, and the key personal consumption and expenditure index – the Fed’s preferred measure of inflation – is due Friday night.
BoJ surprises as Ueda stays easy
In Asia, the focus was on the Bank of Japan after last Friday’s policy meeting.
The BoJ pushed back against recent rate hike speculation with governor Kazuo Ueda saying Japan was not “in a state where inflation accompanied by wages growth – sustainable and stable inflation – is in sight”.
In fact, rather than shifting to a more hawkish position, the BoJ’s forward guidance still suggests further easing night be required.
The BoJ’s statement also helped the US dollar to strengthen with the central bank’s more cautious approach hitting the Japanese yen and pushing the USD/JPY higher.
However, other key regional markets were stronger, with the Singapore dollar and Chinese yuan both higher on the day. The USD/SGD and USD/CNY both fell.
Aussie, kiwi pressured despite oil gains
The Australian and New Zealand dollars also saw small gains but both markets remain broadly near recent lows versus major currencies.
The US dollar’s strength – along with recent risk sentiment problems and equity market weakness – has weighed on both currencies.
As a result, the Australian dollar in particular hasn’t been able to benefit from a recent improvement in some commodity markets with crude oil hitting 12-month highs last week. Iron ore is near 15-month highs.
This week, Australian inflation numbers on Wednesday and retail sales on Thursday will be key. From NZ, all eyes are on Thursday’s business confidence numbers.
Aussie, kiwi rebound, but still near lows
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 25 – 29 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.
