USD GDP surprises, boosting USD
The US dollar staged a massive comeback overnight after a stronger-than-expected GDP read.
The June-quarter growth numbers came in at an annualised 2.4% – well above the 1.8% forecast.
US growth was boosted by personal consumption and non-residential investment while inventories – a major drag on growth in the March-quarter as companies tried to shift over-ordered stock – was a small positive this quarter.
US shares turned sharply lower on worries about further Fed rate hikes.
The US dollar gained with the USD index jumping to two-week highs.
Euro hit as Lagarde points to deterioration
The other key focus overnight was the euro, after the European Central Bank raised rates by 25 basis points bringing the deposit rate to 3.75% and the refinancing rate to 4.25%.
The euro was weaker, however, because although the ECB said it was data dependent ahead of its next meeting in September, ECB president Christine Lagarde also indicated that the current economic outlook has deteriorated.
The euro fell versus most currencies. In other markets, the Australian dollar was mostly weaker in the face of USD strength, while the kiwi and Chinese yuan also fell.
JPY rates to stay in the negative
The Bank of Japan is the next major event with economists speculating a small change in policy around the BoJ’s yield curve control program is possible, but a major change in interest rates is not seen as likely.
The BoJ’s yield curve control program anchors the 10-year bond yield at 0.00% in a 50bps band on either side. Any change in policy would likely allow the 10-year yield to drift higher and support the JPY.
Otherwise, official rates in Japan remain in the negative – and seem unlikely to change for the foreseeable future, weighing on the JPY.
Aussie hardest hit as USD surges on GDP
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 24 – 29 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.
