Written by Steven Dooley and Shier Lee Lim
Greenback down for second day
A big miss in US retail sales hit the greenback overnight with the USD index falling for the second consecutive session.
January retail sales saw a 0.8% fall (versus expectations for a 0.2% fall) while the core series dropped 0.6%.
The retail sales result was the first miss for this series since the July 2023 report.
Other US numbers were mixed with the Philly Fed index higher but industrial production down.
The greenback continued to back away from three-month highs with the USD index down 0.4%.
The Swiss franc and Canadian dollar were the largest beneficiaries from the USD’s weakness.
The AUD/USD gained 0.5% as it shook off a disappointing Australian jobs report that saw only 500 new jobs added in January. The unemployment rate climbed from 3.9% to 4.1%.
The EUR/USD and GBP/USD saw smaller gains.
USD/SGD reverses ahead of NODX
We anticipate that, in part due to favourable base effects, the growth of non-oil domestic exports (NODX) would accelerate to 3.7% y-o-y in January from -1.5% in December.
This suggests that, sequentially, NODX growth decreased to -5.0% m-o-m seasonally adjusted from -2.8%, mostly due to a further drop in exports of volatile medicines.
The USD/SGD – in line with other USD pairs – has recently reversed lower from three-month highs.
MYR at lows
In keeping with the advance estimate, we anticipate GDP growth to accelerate to 3.4% y-o-y in Q4 from 3.3% in Q3.
The industrial sector most certainly remained modest, consistent with still-weak export growth, while the mining and agricultural sectors probably contributed somewhat. In the same vein, we anticipate that the current account surplus would slightly decline from MYR9.1 billion in Q3 to MYR8.3 billion in Q4, indicating muted foreign demand, especially from China.
In Asian FX in 2023, MYR was the largest underperformer. In our opinion, that will alter in 2024. The current account may gain more from tourism-related policies than from net exports, which are constrained by the amount of foreign exchange earnings converted.
Greenback reverses from three-month highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 12 – 17 February
All times AEDT
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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.
