Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
China rally continues, but greenback gains late
The US dollar staged a small recovery overnight after Federal Reserve chair Jerome Powell poured cold water on hopes for further larger-than-usual rate cuts.
Powell said current projections are looking for two 25bps rate cuts for the rest of the year and the US central bank would only take more aggressive action if the US labour market showed further deterioration.
The USD index rebounded from 14-month lows.
Earlier, Asian markets had seen another super-charged rally with Friday’s announcement from China for support to the housing market driving further gains, Notably, iron ore surged 8.2% while steel rebar gained 4.6%.
The Aussie was helped by the gains in Chinese markets – particularly commodities – but the USD’s late rally caused the gains to ease. The AUD/USD ended up 0.2%. The Aussie was higher in other markets.
The NZD/USD gained 0.1%
In Asia, the USD/SGD gained 0.2% while the USD/CNH jumped 0.3%.
Greenback eyes ISM manufacturing data
At 11.45PM AEST today, US manufacturing data will be released.
We anticipate that ISM manufacturing decreased slightly from 47.2 in August to 46.8 in September. Although results from regional Fed polls were diverse over the month, they were generally unfavourable.
In September, the S&P manufacturing PMI dropped, with the lowest number of new orders since May 2020. Recent poll responses indicate that plans for capital spending are being affected by election uncertainty.
From oversold circumstances at the end of summer, the USD has stabilized, but the near-term picture is still unclear.
Sterling weakens after rally
The British pound eased last night ahead of the September British Retail Consortium price data today.
In the event that prices rise at zero percent on a month-to-month basis, the yearly rates of both total and non-food inflation would slightly decline, to -0.4% and -1.6%, respectively.
The GBP/USD pair is showing some hesitant symptoms of trend slowing, but not enough to suggest a significant reversal.
In other markets, the GBP has also cooled, with the AUD/GBP at ten-week highs and NZD/GBP also near the best levels since mid-July. The GBP/SGD neared two-month highs.
USD rebounds on Fed commentary
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 30 September – 4 October
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.
