Greenback stages comeback ahead of Fed
The US dollar was stronger on Friday, finishing a week that saw a solid rebound from earlier weakness, as markets looked ahead to the Federal Reserve decision on Thursday and other major central bank decisions later in the week.
The USD index hit 15-month lows earlier in July after a weaker than expected inflation reading caused markets to wind back bets for further Fed rate hikes. While markets expect one final rate hike this week, there are no further rate hikes priced into markets.
That said, markets are cautious ahead of this week’s Fed decision, and the US dollar was stronger last week.
The USD index gained 0.3% on Friday and finished up 1.1% for the week.
China growth worries hit Asia
The USD’s strength saw most major currencies weaker with the euro and British pound both falling last week.
The Japanese yen was the weakest of the major currencies ahead of Friday’s Bank of Japan. The BoJ seems likely to keep rates on hold and remain the only major central bank with interest rates still at pandemic-era lows.
The Australian and New Zealand dollars were the hardest hit with worries about Chinese growth weighing on both currencies last week.
The AUD/USD fell 0.8% on Friday and was down 1.6% for the week.
The NZD/USD fell 1.1% on Friday and ended 3.2% lower over the week.
Despite China’s weaker June-quarter GDP read, the Chinese yuan was broadly steady last week, while the USD/SGD climbed 0.6%.
PMI first, then central banks
While central bank decisions will dominate the later part of the week, the early action will be driven by today’s PMI numbers.
The purchasing manger indexes are the most up-to-date reading of the global economy and are released for major economies over the next 24 hours. (Chinese PMI numbers are released next week, however).
Most recently, while manufacturing remains stuck in the doldrums, services, like travel, entertainment and education, have also started to weaken, a sign that global rate hikes are starting to impact.
USD rebounds ahead of Fed
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.
