Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
US growth leads the way
The greenback rallied for a second day after a big revision in June-quarter GDP saw the US economy grow 3.0% annual terms – up from the 2.3% in the first reading.
The US remains the stand-out performer in terms of developed market growth in a trend that has defined the global economy for the last two years.
The USD index extended its recent rebound on the news, climbing for a second day, and is now up 0.9% from the lows.
Across markets, the USD mostly gained with USD/JPY up 0.3% and USD/SGD flat.
The USD/CNH bucked the trend with the pair down 0.6%, closing at the lowest level since June 2023.
The Aussie and kiwi also managed to hold on to earlier gains, with the AUD/USD up 0.2% and NZD/USD up 0.3%. Australian markets will be looking to July retail sales numbers at 11.30am AEST – expected to come in at 0.3% after the 0.5% result in June.
Tonight, all eyes are on US personal consumption and expenditure data (PCE), due at 10.30pm AEST, the Federal Reserve’s preferred measure of inflation. A higher number could see the greenback extend its rebound.
Euro, pound weaken after rally
The US dollar strength most notably played out with a weakening in the euro and British pound overnight.
The EUR/USD fell 0.4% while the GBP/USD lost 0.2%.
The euro and pound also fell sharply versus the Australian and New Zealand dollars, with AUD/EUR at two-month highs and NZD/EUR at three-month highs.
Coming up, UK markets will be looking to the upcoming business confidence numbers. The headline business confidence balance increased in July after declining in June, making this poll one of the most optimistic in the UK.
The number of employees is at its highest point since 2017. In July, pricing expectations increased as well, but not to the same degree as they did in the spring.
South Korea industrial output projected to decline
We anticipate that industrial output growth would decrease in July by -2.6% m-o-m from 0.5% in June, mostly due to the expected offset of robust chip production by poorer auto production. Industry statistics indicated that car production growth fell substantially in July on both a month-over-month and year-over-year basis, indicative of the ongoing slowdown in demand for automobiles, especially electric vehicles.
We anticipate that July’s rise in chip manufacturing was robust despite the surge in investments in AI servers. More chip manufacturing was probably spurred by the low inventory/shipment ratio in advance of the robust seasonal demand. Nevertheless, we believe that the manufacturing of electronics and car components continued to likely hinder the expansion of IP overall.
We continue to be cautious on the Won despite the decline in USD/KRW because of (a) the continuous domestic purchase of USD and (b) the movement’s rapidity. On KRW, we are currently neutral.
AUD/EUR, NZD/EUR at recent highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 26 – 31 August
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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